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I purchase products from my manufacturer and have them shipped to Amazon's FBA (Fulfilled by Amazon) warehouses. Amazon then sells the products and sends me a check. Although I own the inventory, it is in Amazon's possession.

I was doing the taxes for 2016 and I had $18,300 in inventory at Amazon on 12/31/16.

Holding this amount out greatly adds to my profit.

The question I have is whether this the way I do it when these product were charged to my credit card and I had a $20,000 balance at the end of the year?

I am using the cash basis.

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Let's see if we can sort this out.

Your inventory, no matter where it is stored, is still your inventory and must be on your books. Amazon does not purchase it from you. Think of it as just keeping it in a storage unit or rented warehouse. The reason you can keep it in Amazon's warehouse for free is because they benefit from you selling things through their website.

Holding this amount out greatly adds to my profit.

I'm assuming this means that without reporting your inventories, your profits are higher, which is the way accounting works. If you didn't have to report inventories and those types of things, companies could manipulate financial statements to say whatever they want.

The question I have is whether this the way I do it when these product were charged to my credit card and I had a $20,000 balance at the end of the year?

What I think you're trying to ask is whether you need to report your inventory if if the amount you've paid for inventory is reflected on your credit card bill. The simple answer is yes, you do.

The reason is because inventories are assets. Think of inventory assets as promise of future revenue. You will eventually convert those inventories into cash.

Credit card balances are liabilities, more specifically debt. They represent what you had to give up in order to get your inventories. They balance each other out.

If you're still having trouble, I would suggest hiring an accountant to handle your small business finances. It will ensure you have no mistakes and will help protect against audits or unresolved tax issues.

I hope this helps you figure out your financial statements!

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