Stores whom utilize the ProfitSystem Cost Factors to depreciate their Inventory Value of older or dead merchandise should also report the lower depreciated Value as Cost of Sales when those items are sold from stock.
Failure to report Cost of Sales at the new lower Value results in overstating the Cost of Sales, thus reducing the store’s potentially taxable margin. Using the original cost of merchandise that is written down ignores this fact. The taxable effect, at least in part, is to take two deductions 1) for inventory write down 2) for higher COS, which would cause a significant issue for the shop in case of an tax audit.
