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James Millar
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Dropbear, post: 246764, member: 92330 wrote:
Thank you both for your replies, Timos I will read that thread tonight :)

James, thank you for clarifying, what you say makes sense to me. And it leads me back to Timos’ reply to study up more on how accrual accounting works.

Just to be crystal clear,

lets say I spend $10,000 on 100 items of stock, and their shipping cost is $1000. The cost of shipping 50 items, would also have been $1000, so I added 50 items to the shipment to get the best value.

I sell 50 of these items in one financial year.

can I claim that the total cost of the first 50 items as $120, each, and the cost of the 2nd lot of 50 items as $100 each, as they were added to the container for no extra shipping cost?

Thanks

You determine cost on a per unit basis and associated expenses would be apportioned on a reasonable basis. I think the ATO would expect apportionment over all units and not just a subset of those sold first (to load up their cost).

Are you sure you have received the correct advice? From an income tax perspective, most entities with trading stock etc are required to use the accruals method (ie there is no choice). Note that I am not talking about GST as it has separate options unrelated to income tax.

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