Inventory on Form 990

[JohnH]

I'm not very familiar with non-profit accounting, but am learning.  This 501(c)(3) reports about $260K in total revenue.  Late last year it published a book authored by the director.  Cost of printing and other book-related expenses was about $25K, which was charged to "Resource Development". Books were sold at full price, some discounts, and some were given away during the year.  Average cost of the books remaining in inventory was about $18K at year-end.

I see there's a place on the 990 to report inventory, but no place to report the full COGS calculation.  So do we just reduce the $25K by $18K, or is there something I'm missing? If we do it this way, then in future years we will increase the charge to "Resource Development" by the average cost of books which leave inventory (whether by sale, discounted sale, or gift).  Am I on the right track or is there another way?

(I had considered just leaving the $25K in Resource Development and not accounting for inventory on the 990, but not sure this would be acceptable since the amount is material. So I'm leaning in the direction above).  I'd appreciate any guidance or opinions you wish to offer.

[JohnH]

I failed to mention something which may be important.  The revenue from the book sales alone was about $10K.  The remaining $250K of revenue consisted primarily of contributions by donors to support and further the activities of the non-profit.  The point being that the book sales revenue is a tiny portion of total revenue.  Also, there was no inventory of any other type at the beginning of the year.  This is the first year this issue of accounting for inventory has arisen. 

[rfassett]

Look at part VIII (that's 8 in English), and in the other revenue section you will see Gross Sales of Inventory and Less Cost of Goods Sold.

Is that what you are looking for?

[JohnH]

H-m-m.  Guess I need to look at the forms a little closer, eh?

Looks like we just enter the $10K on 10a, the $7K COGS on 10b, the $18K as inventory on the balance sheet, and reduce Resource Development by $25K.  There's really no accounting for COGS in the traditional manner (Opening Invty + Purchases - Ending Invty).  Then each year going forward, the Resource Development expense account is increased by whatever amount is entered on 10b as the inventory winds down. 

Thanks, Ron

[Catherine]

Have you looked at the 990-T?  For taxable portions of the non-profit activities (like selling books hopefully at a profit to raise funds).

[Gail in Virginia]

20 hours ago, Catherine said:

Have you looked at the 990-T?  For taxable portions of the non-profit activities (like selling books hopefully at a profit to raise funds).

But is it taxable?  It was written by the director and published by the agency - does it further the exempt purpose of the organization?  Does the director receive any remuneration for writing the book?  Do the people selling the book get paid or is it all volunteer labor? Selling items to raise funds is not always a taxable activity to a non-profit.  It all depends on facts and circuses, as Jerry Mealer used to say.