What merch inventory records should a self-employed musician keep?
Published · Updated · Clef
If your Canadian music business sells merch, count the goods you still hold for sale at year end. Save your supplier invoices, sales records and notes on stock changes so your accountant can trace the count. List free items, damaged stock and unexplained differences separately before the inventory value is decided.
Why does unsold merch need its own record?
The CRA’s guidance for Canadian sole proprietors explains that an annual inventory helps determine cost of goods sold and net income on Form T2125. Cost of goods sold is the cost attributed to the goods sold during the period. A pressing invoice or shirt order tells you what you purchased. It cannot tell your accountant how many units remain in your merch case at year end.
Keep the count separate from the valuation. Record the quantity you have and retain what you know about the cost and condition. Ask your accountant to apply the valuation method for your business. A retail price on your merch table is useful for sales records but should not be substituted for an inventory value without review.
What should you count and where should you look?
List items at a level you can match to both the supplier invoice and sales records. Count small, medium and large shirts separately if your sales sheet tracks them that way. Split vinyl editions if the pressings cost different amounts or sold under different item names. Record the count date, who counted and where the stock was found.
Check the cases you take to shows, shelves at home and any units held elsewhere on your behalf. If a venue or shop is holding merch, ask for its stock statement and confirm which units are still yours. Record stock in transit or with an uncertain owner separately for review. An internal move from your house to the van changes the location, so avoid counting the same case twice.
How do you reconcile a batch that does not match the count?
Constructed example: you start with no stock of a new shirt and receive 50 from the printer. You log 22 show sales and 9 online sales. You also document 3 shirts given to the photographer. That leaves 16 expected on hand. At year end, you find 10 in the show case and 5 at home, for a physical count of 15.
Keep the expected and physical quantities visible. Recount both locations and check for an unlogged sale, return or transfer. If you still cannot explain the missing shirt, record the difference and what you checked. The example is a unit reconciliation. The treatment of the giveaway and the missing unit should be reviewed before the stock is valued.
| Count entry | What to keep |
|---|---|
| 50 shirts received | Printer invoice and delivery record |
| 31 sold | Show tally and online sales records |
| 3 given away | Dated note describing the units and reason |
| 15 counted, 16 expected | Location counts and note on the unresolved unit |
What should you hand to your accountant?
Send the dated count sheet, last year’s closing inventory records if available, supplier invoices and any credits, and the sales totals behind the movement calculation. Label damaged items and items used personally, and separate them from units still offered for sale. Explain anything you could not match and include the date of the last count.
If the purchase is already recorded in Clef, use Receipt / Reference # to identify the supplier invoice and Internal Notes to point to the relevant batch or worksheet. The expense editor includes both optional fields in its submission. Keep the stock worksheet and its underlying supplier and sales records together for review. Use the linked digital receipt and year-end guides for the wider filing and handoff.
What else should I know?
Should I count the shirts in an unopened box?
Include the box in your location list. Verify its contents where practical, or record that the quantity came from the packing slip and flag it for confirmation.
What if my count happened a few days after year end?
Keep the actual count date and list stock movements between year end and the count. Give the reviewer enough detail to reconstruct what was on hand at the cutoff.
Should I enter a sample or damaged shirt as a sale?
Record what happened to the unit and when. Preserve any evidence that explains the change, then ask your accountant how to classify or value it.
What if a bundle includes a shirt and a record?
Track how many units of each item left stock and retain the bundle sale record. Keep the amount the customer paid visible separately from the item counts.