Cost of Sales vs. Inventory

[tomkb]

Just going through my peachtree for dummies book and I wanted to know how to classify items I purchase that will be for resale. The book makes no mention of inventory items but my model chart of accounts has accounts for Inventory Items as well as Cost of Sales items and I was wondering how to choose between the two.

Also, what is the general rule of thumb for determining whether an item is an office expense or a fixed asset. For example, I bought a return address stamper that is good for 50,000 stamps for $13. Is this an expense or a fixed asset like a piece of furniture? I figure it's good for about 2 years.

thanks.

[dringstrom]

An alternate reference that will provide more guidance on inventory is Learn Peachtree Accounting (http://www.acctadv.com/go.mv?id=lpa). Items go into inventory when initially purchased, then when you sell the item the cost moves to Cost of Goods Sold. Peachtree's documentation elaborates on how to set up your inventory items for this to occur automatically.

Fixed asset determination is based on useful life, but also cost materiality. A $13 item does not need to be capitialized. Your tax advisor can offer guidance, but one rule of thumb is any item costing over $1,000 with a useful life of 3 years or more. The IRS offers documentation on acceptable useful lives.

[tomkb]

Thank You.