Direct Sales Expense


Direct Sales Toy Inventory

Direct Sales Toy Inventory


I started a direct sales business last year and I purchased toys to add to my demonstration kit. These toys are the same ones that customers can buy ie. are not samples and I can resell them if I want. Where do I claim the expense of all the items that were purchased for my kit?

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If the toys purchased were to sell to your customers, then you have purchased inventory. Some points to remember about inventory are:

- Inventory sits on your balance sheet as an asset. You've made an investment in your product.

- Inventory cannot be expensed until it is sold. You can deduct your cost of goods sold (reduce your inventory) after each sale. This matches expenses with the revenue ... a generally accepted accounting principle.

- Personal use of inventory must be removed as an owner's draw/expense and not claimed as a business expense.

You can find out how to book the purchase and sale of your inventory here:

You will find how to account for cost of goods sold, your inventory at year-end and your demonstration samples here :

Once you've purchased inventory, you may want to calculate you some ratios to ensure you don't run into cash flow problems:

Comments for Direct Sales Expense

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Apr 30, 2015
by: Anonymous

My question was not related to inventory but is related to the toys that are demonstrated during parties. I had to purchase product to demo and was wondering what line to claim this on? Thanks.

May 06, 2015
Toy demos
by: Lake

You did say you could sell the demos ... presumably at a reduced price. To me that is inventory.

If they weren't going to be resold, then I would expense them as a COGS account such as Product Demos.

Feb 05, 2016
Sales Aid
by: Anonymous

In Canada, we call that a Sales Aid. This can also include almost anything you purchase from your Direct Sales company; business cards, website subscriptions, samples, inventory etc... Contact your government tax office for more information.

Feb 05, 2016
Sales Aid
by: Lake

I agree. However if you didn't make the purchase initially as a sales aid and later take it out of inventory, you will need to record the removal from inventory for sales purposes.

Mar 10, 2016
Taxable Benefits
by: Anonymous

If you earn free product from your direct sales company that is then used in your business is this then a taxable benefit. If it is, would that be added to your income amount, which could then change your tax bracket or is it filled out as a separate line item on your taxes.

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