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Tuesday, December 13, 2011

Reconciling Our Monthly Paperwork

Warning: Long, Dry Post Ahead!

Now it's time to make sure our paperwork matches the reports we've printed. Some people skip this step, and I suppose that's not a big deal since ultimately we're going to make our paperwork match the reports. But I like to have the double check step, just to make sure I haven't missed anything. This step is just like balancing your checkbook. You're just going to go through each of the reports that you printed yesterday and double check them to your Dome book. I like to check them off as I've matched them up.

Then at the top of each report, I put the total for that particular report. Be careful on these. For your Fees and Payments Received reports, if you deleted any transactions that were personal or duplicate, then the total that is printed at the bottom of the report is going to be WRONG. You'll need to manually add the numbers in those reports numbers if you deleted anything.

As you finish double-checking and adding up a report, you can go ahead and write that in the correct space on your Dome monthly page.

On the right side of this page is where you'll write all of today's numbers.

Category 1 is Merchandise purchases. You'll find this total by adding up all of your receipts (and double checking it to the left page in your Dome book). Go ahead and write that total under "Total This Month".

Category 2 is Accounting. I don't use this, because I do all my own paperwork and taxes, but if you pay someone to do that, then write that here.

Category 3 is Advertising. This would be where you write any business cards, pens, or other promotional materials. If you include a free pen (with your website on it, for example) in your packages, then you can put that here.

Category 4 is Auto Expense. I believe this is for leased vehicles. This is not for gas and mileage when out shopping.

Category 5 is Cartons, Etc. This is for any shipping materials, tissue paper, packing peanuts, .... you get the idea.

Category 6 is Contributions. If you make any donations in the name of your business, they go here. I just lump my tithing in on our joint Schedule A, but you could put that here if you'd like.

Category 7 is Delivery Expenses. I don't even know what that is, but I know this is not where we put our shipping costs. (real helpful, huh?)

Category 8 is Electricity. If you have a space in your home that is 100% dedicated to your business, then you can deduct a portion of your home expenses. You'd need to figure up the total square footage of your home, then figure up the square footage of your dedicated eBay space. Then divide the eBay square footage by the total square footage to find the percentage. Then you can deduct that percentage of all your home expenses (heat, electricity, mortgage, etc). I'm going to just figure that up at the end of the year, but next year I will probably figure it each time we pay a home bill.

Category 9 is Entertainment. I believe this is for if you take a client out for a business dinner, and other things like that. I don't use it.

Category 10 is Freight & Express. This is for inventory that you purchase. I don't separate it out. I just include it in the cost of my inventory purchased.

Category 11 is Heat. See Category 8 above.

Category 12 is Insurance. I'm not sure what this is for, but it's not for shipping insurance.

Category 13 is for Interest. If you buy inventory with a credit card or Kabbage, then you can deduct the interest for those purchases here.

Category 14 is Laundry. I've never thought of this, but I suppose we could deduct the laundry soap for any clothing we purchase for resale that needs washed. You would have to keep a bottle of laundry soap separate for JUST resale clothing, and you would have to do the entire load of JUST resale clothing. That seems complicated to me. I'd rather just toss my 2 or 3 pieces into the washer with the rest of my family's laundry, but if you sell mostly clothing, this is definitely a category to keep in mind.

Category 15 is Legal Expense. Hopefully none of us gets sued...

Category 16 is Licenses. If you had to pay for a State Sales Tax number, or for a Tax Exempt number, those expenses could go here.

Category 17 is Miscellaneous Expenses. I've only used that once this year. I bought an eBay book for $5.95 that I put here. Most of our expenses will have a specific category, so the miscellaneous one will be used rarely.

Category 18 is Office Expenses. This is for office supplies like pens, envelopes, your Dome book, notepads, calendars (for logging mileage), etc...

Category 19 is Postage. This is for all of your shipping paid, as well as your shipping insurance. This is a big one! This will do some serious damage to your taxable income, so you'll want to make sure you've got all of these numbers.

Category 20 is Rent. If you rent your home or apartment and you have a dedicated eBay space, then put the correct percentage of your rent here.

Category 21 is Repairs. I guess this would be for repairs to a dedicated eBay computer, or if you had to pay to have inventory repaired before you listed it. I've never used this category.

Category 22 is Tax - Sales. Pretty self-explanatory. You don't want to have to pay income tax on someone else's sales tax. When someone pays you sales tax, and then you pay that to the state, write that here.

Category 23 is Tax - Soc. Sec/Med. This is for if you have employees and deduct these taxes from their pay.

Category 24 is Tax - State U.I. Same as above.

Category 25 is Tax - Other. Same as above.

Category 26 is Selling Expenses. This is for gifts that you've given to customers in order to keep their business. This category has always seemed strange to me. It's basically the bribe category, don't you think? I never use it.

Category 27 is Supplies. This is cleaning supplies. If you buy Magic Erasers or Lysol or paper towels for cleaning dirty toys, or shoe polish for shoes or whatever, that goes here.

Category 28 is Telephone. This is a touchy subject for tax preparers. You really shouldn't deduct your entire cell phone bill, unless you use it exclusively for eBay. When I upgraded from regular service to a data plan, I was planning on deducting the difference, because I was upgrading primarily so I could look things up when I'm out shopping. But I find that I use it an awful lot for Facebook and other non-business things, so I won't be deducting any of my phone costs. Use very careful judgment in this category. Cell phone deductions often trigger red flags to the IRS.

Category 29 is Trade Dues, Etc. Dues to organized groups, and magazine subscriptions go here. I never use this category.

Category 30 is Traveling Expenses. Here is where you'll put your food and toll expenses from road trips.

Category 31 is Wages & Commissions. If you sell for other people, you would put the amount that you paid them in this category. Alternatively, when you sell something for someone else, you could write their receipt up as if you were buying the item from them for that price. If you go that route, you would put that number in Category 1 instead of this one.

Category 32 is Water. I don't think we really need this one, since our businesses don't generally use water.

Categories 33, 34 and 35 are for whatever we want them to be.

I have made Category 33 my eBay/Paypal fees category. I lump them together.

My Category 34 is Subscriptions. That's where I put my Seller Sourcebook charges, as well as my charges (for domain names that redirect to my store).

My Category 35 is for Section 179 expenses. When we buy large items like printers or computers, we're supposed to depreciate them over several years. That means were aren't really supposed to deduct the full amount in one year. We're supposed to spread it out. However, we can call them Section 179 expenses and just deduct it all at once if we want. I have my Thermal Label Printer in this category.

If you had to issue any refunds during the month, be sure to note those somewhere. I put them in line 57, even though that's totally 100% the wrong spot. I just write it there as a reminder.

I know that was a lot of information, but it's important. Thanks for sticking with me. One more quick paragraph before I'll let you go for today. Once you've got all these numbers written in, it's a matter of just quickly adding everything up to get your bottom line for the month. Add up all of the left side of this page (Total Receipts From Business or Profession). Add up all of the right side of this page (Expenditures - the categories we just talked about). Subtract your Total Expenditures from your Total Sales Receipts (Total Amount column). That number gives you your net profit for the month.

Other posts in this series:


  1. Thanks for the great post and series! I know it's a lot of work and time consuming, so I do appreciate it. I'm thinking the Auto Expense category may also be used for repairs related to your auto. This year I had 2 major auto repairs and also had to buy tires and windshield wipers. I'm thinking I may be able to deduct a portion of these expenses since I use my car about 50% for my eBay business. Something to keep in mind and check with your tax preparer. Another expense to deduct is the monthly cost of the internet. The more deductions the less our tax liability! Looking forward to the rest of the series. Thanks for sharing!

  2. This is such an amazing posts. Thank you for taking the time to share your knowledge with us.

  3. I could hug you. :) Thank you very much.