For simplicity sake, lets say I make metal widgets. I purchase raw metal from ‘ABC Corp’ and convert the metal into widgets. The raw metal purchase goes as an expense for my company ‘Widget LLC’
At the end of the year I have $10k worth of widget inventory. How do I deal with this from an accounting/tax perspective? All examples I’ve seen online are for purchased inventory but I’m a manufacturing business so idk how that works? Is it any different?
You’re tussling with a subtopic of accounting that I’d feel safe saying even most accountants don’t interact with on any kind of regular interval. That’s not to say we couldn’t learn, but it’s one of those specific-to-an-industry things that some don’t touch after ACC 301/302.
My first recommendation is to get outside professional help. If you want to give yourself a brief primer on the topic, I recommend you look into (these being the key phrases and terms) cost basis, cost accounting, and the following accounts: Raw material, in process goods, and finished goods.
If you have direct labor and overhead outside of yourself, it can get quite involved. Cost allocation becomes very detailed for manufacturers and is a learned skill.
Happy to answer any specific questions you have on the topic though.