Sale date question

[sf-audiophile]

If the item is sold on 12/31/2024 but the buy pays on 1/1/2025. Is the sale 2024 0r 2025?

[kensgiftshop]

If they pay next year, the sell will be for next year.

[pastimpressions]

It doesn't matter as long as all of your sales records are in-line & the costs, expenses etc. for the sale are in-line with one or the other. 

There is a time zone differential between my sales data & how Ebay records their data/sales.

I have had several occasions to record one day when Ebay says it's another.

Again, just don't log the same sale/cost/expense/loss/etc. for more than one day/time/date

[tarotfindsandmore]

Sale is complete when payment has processed and posted to your account.

[dbfolks166mt]

     There are two answers to your question. The first is from the eBay perspective which for your example where the buyer paid on 1/1/2025 the sale and revenue would be recognized in 2025. From a personal accounting perspective and tax filing purposes it depends on whether you use cash accounting or accrual accounting. 

     If you use accrual accounting, which is what I use, then the revenue would be recognized on 12/31/2024. If you use cash accounting the revenue would be recognized when the funds are transferred to your checking account which would probably be somewhere after 1/1/2025. 

[studiodeflores]

I use the cash accounting method, so, for me, that would be 2025 income.

[mam98031]

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@sf-audiophile wrote:

If the item is sold on 12/31/2024 but the buy pays on 1/1/2025. Is the sale 2024 0r 2025?

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It depends on what type of accounting system you are using to report your sales / income.

Cash accounting means you recognize your sales and costs of sales when they are paid for.  AKA the date you paid for them.  That goes for supplies and everything else you purchase for your little business.  I've done cash accounting since the day I started selling.

There are other accounting methods, so learn about them and decide which one works best for you and reporting to the IRS.  Stick to whatever you pick, do NOT change it in later years.  Keep it clean.  IRS doesn't like it moving back and forth.

https://www.investopedia.com/terms/a/accountingmethod.asp#:~:text=Average%20Cost%20Method-,What%20Is....

https://www.irs.gov/pub/fatca/int_practice_units/accounting-method-basics.pdf

[kennys-kollectibles]

I don't care what method you use, if the buyer buys the item on 12-31, but never ends up paying you, 

then how can anyone use a method that considers that a sale, even though they 'bought" it on 12-31?

[mam98031]

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@kennys-kollectibles wrote:

I don't care what method you use, if the buyer buys the item on 12-31, but never ends up paying you, 

then how can anyone use a method that considers that a sale, even though they 'bought" it on 12-31?

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@kennys-kollectibles 

There are different methods of accounting.  We all just need to pick one and stay consistent.  IRS doesn't like us switching it up.  While the Cash method works very well for you and me for that matter, there are others that an accrual method works for them.  It is an individual choice, just be consistent.

[johnrj1226]

Always followed this rule for my eBay sales and my 41 year career in equipment  sales "a sale  is not completed until position is transferred from the seller to the buyer on a state  delivery date i.e. date the  carrier  delivered or the buyer picked up' and paid for the IRS is good with that.  Further eBay states that the seller is fully responsible for a for the shipment up until the date a package is delivered in the  same condition as described in their listing.  Should a package go into the  carrier's "black hole" or take a ride on the MTA** like poor old Charlie did, it ain't a sale.

** https://www.youtube.com/watch?v=S7Jw_v3F_Q0  Kingston Trio MTA  release 1959,  Freshman year in HS with acne went to my first  formal HS dance wearing Clearasil with high water slacks and white socks and dress loafers - wasn't alone.

[dbfolks166mt]

I use the cash accounting method, so, for me, that would be 2025 income.

     Cash accounting can become complex especially for revenue and expenses that are close to the end of the calendar year. Both revenue and expenses are recognized when you actually receive the case or the cash is taken from your account. In you example you would be correct, however if the buyer had paid for the item on 12/31/2024 the cash is not going to arrive in your checking account until sometime in 2025 so it is 2025 revenue not 2024. 

     It becomes more complex with expenses. If you purchase something on 30 November 2024 using a CC, the item does not appear on your CC statement until December 2024 and you pay for the item in January 2025 and the CC company takes the money from your account in 2025 then it is a 2025 expense. Cash accounting is exactly what it states it follows the cash not the payment or the purchase date. 

[mam98031]

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@dbfolks166mt wrote:

I use the cash accounting method, so, for me, that would be 2025 income.

     Cash accounting can become complex especially for revenue and expenses that are close to the end of the calendar year. Both revenue and expenses are recognized when you actually receive the case or the cash is taken from your account. In you example you would be correct, however if the buyer had paid for the item on 12/31/2024 the cash is not going to arrive in your checking account until sometime in 2025 so it is 2025 revenue not 2024. 

     It becomes more complex with expenses. If you purchase something on 30 November 2024 using a CC, the item does not appear on your CC statement until December 2024 and you pay for the item in January 2025 and the CC company takes the money from your account in 2025 then it is a 2025 expense. Cash accounting is exactly what it states it follows the cash not the payment or the purchase date. 

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Cash accounting is not complex.  Or at least it doesn't have to be.  Consistency is the key.  You brought up some great points.  However as long as the seller is consistent year to year, it all works out.  Over complicating the process isn't necessary but consistency is the key.

Regarding your flow of a Credit Card Charge, I disagree.  It is just fine to take the expense when the charge is applied to the Credit Card, NOT when you actually pay the bill.

https://quickbooks.intuit.com/learn-support/en-us/help-article/pay-bills/credit-card-accounts-treate...

https://www.nerdwallet.com/article/small-business/accrual-vs-cash-basis-accounting

[luckythewinner]

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@sf-audiophile wrote:

If the item is sold on 12/31/2024 but the buy pays on 1/1/2025. Is the sale 2024 0r 2025?

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The "sale date" for what purpose? For tax reporting? For accounting? For inclusion on a 1099-K?

[dbfolks166mt]

@dbfolks166mt wrote:

I use the cash accounting method, so, for me, that would be 2025 income.

     Cash accounting can become complex especially for revenue and expenses that are close to the end of the calendar year. Both revenue and expenses are recognized when you actually receive the case or the cash is taken from your account. In you example you would be correct, however if the buyer had paid for the item on 12/31/2024 the cash is not going to arrive in your checking account until sometime in 2025 so it is 2025 revenue not 2024. 

     It becomes more complex with expenses. If you purchase something on 30 November 2024 using a CC, the item does not appear on your CC statement until December 2024 and you pay for the item in January 2025 and the CC company takes the money from your account in 2025 then it is a 2025 expense. Cash accounting is exactly what it states it follows the cash not the payment or the purchase date. 

Cash accounting is not complex.  Or at least it doesn't have to be.  Consistency is the key.  You brought up some great points.  However as long as the seller is consistent year to year, it all works out.  Over complicating the process isn't necessary but consistency is the key.

    Agree 100% on the consistency but would add in the ability to explain and defend the accounting method during an audit. Lots of individuals and businesses use hybrid forms of cash accounting which is fine.

Regarding your flow of a Credit Card Charge, I disagree.  It is just fine to take the expense when the charge is applied to the Credit Card, NOT when you actually pay the bill.

https://quickbooks.intuit.com/learn-support/en-us/help-article/pay-bills/credit-card-accounts-treate...

https://www.nerdwallet.com/article/small-business/accrual-vs-cash-basis-accounting

     The diversity in cash accounting is one reason it is not recognized by GAAP. Old habits from my accounting days but I have always preferred and used accrual accounting. Both methods have their pro's and con's.

[mam98031]

I wasn't talking about some hybrid version.  I'm sorry if I mislead you.  I thought my post was pretty clear as to what I was speaking to.

Fortunately most of us do not or are not required to meet GAAP standards.