I don’t know of any courses or books that I would recommend (other than Tom’s) for the continuing education of a financial person. Well, there’s one other little addition to the list: I do have a monograph out in ebook format on one single topic, but haven’t had been able to free the time to collect and edit together some of the other pieces I wanted to offer, or to write the completely new pieces to the series.

If you have a solid understanding of the principles of accounting, you’ll be able to apply them to book publishing, and not make too many errors. The changes with the ongoing digital revolution seem to be in the number of copies sold per title (which is dropping, sad to say), in the length of time over which a title can profitably remain available (longer, but the bulk of the sales are still likely to be happening in the first few months of its life, OR in the first few months after a major uptick as some social media-based popularity takes hold), and in the drastic reduction of the variable cost components of COGS.

I haven’t seen any consensus emerging on what that means for the usual ways to amortize fixed costs or any of the rest of the minutiae of representing reality in your accounting records, though.

If you have any niggling little questions, you can always find me in one of the groups I help run on-line and ask them. (Those groups are the Yahoo Group called Self-Publishing, Pub-Forum (at Pub-Forum.NET) and on Linked-In: the Self-Publishing subgroup of the Ebooks, Ebook Readers, Digital Books and Digital Publishing group. None of them are really about SELF-publishing, as much as they are about the who, how, why and what of being a micro publisher. Of course, any small publisher can apply most of the material as well.

Awesome accounting explanations in this thread. I own Thomas Woll’s book “Publishing for Profit”. He explains the Title P&L statement and enough basics to give a general understanding of the accounting process for publishers. With the transformation of digital content for delivery in all published formats (print, audio, video, etc), what do you recommend to stay current in terms of an on-going accounting/financial/tax planning education for a small, independent publisher? Books, online courses, etc.

Once again, super job in simplifying the concepts for those of us who may not be accountants, but do love publishing and need to grow with the changing environment of the world of ISBN/EAN related products. Thanks!

And you’re also right about the way to handle the inventory, and the COGS. You can also amortize the plant in something other than a straight line. There are lots of IRS approved ways, but personally, I don’t see the point of doing the extra work. Once your company is at a steady state, producing a similar number of books and similar plant costs each year, your tax bill will be about the same each year no matter which method you’re applying. It’s only at the growing or shrinking part of the life-cycle that it changes things.

Thank you for the quick reply and the email. That probably will help me get it right, although the journal entries would be useful, too, if and when you get the time. (As I’m starting a small publishing business in addition to working my “day job,” being daddy and grandpa, and a juggling a few other interests on the side, I know how that goes!)

Just to sum up, if I understand you correctly the inventory value of a book is the PPB cost for the book, which is expensed upon sale of the book, whereas Plant Costs are amortized over a year or two or three depending on the expected “life” of the book. If that’s right, then with luck I can at least get started.

Thanks again!

Thanks for the compliment. Your question is common, and many, many people who don’t know publishing accounting well do it just that way. But it’s not only against the regs in FASB, it’s also not a good idea from a management accounting viewpoint as well.

PPB does go into inventory, but plant doesn’t. It’s capitalized as any product development cost would be. If you did it the other way, it often leads to very expensive mistakes in assessing the relevant costs for a variety of decisions.

Some publishers did, once upon a time, deduct all plant costs when the books went on sale. This was advantageous from a tax view point, and there was at least some justification from a FASB POV as well. But the IRS came down **very** hard on that, and it’s not done that way any more.

The journal entries would be helpful for those who do this sort of thing. I’ll try to remember that for the next time I have time to blog . . . . Which is getting increasingly hard now that I run 3 of the larger social media groups for publishers. (For free. How dumb am I??)

It seems like PPB and Plant Costs should be factored into the value of book inventory, but if so then wouldn’t those costs be expensed somehow when books are actually sold rather than amortized? I’ve read elsewhere that plant costs are actually treated as lump-sum deductions from revenue at the time of sales rather than being expensed by category, but the information was not specifically geared to the publishing business.

What would be helpful, I think, would be a set of entries that shows how the money moves from start (key types of production costs) to a finished product in inventory and finally to income/expense entries after a sale is made. If you have the time and inclination to provide such, I would greatly appreciate it. Thanks!

POD printing doesn’t really change the issue, except that you don’t ever have to send the books through inventory and they never show up on the balance sheet.

You still have royalties and plant costs, of course. They are booked exactly the same as always. And you amortize the plant costs over the expected life of the book (as in, the period over which you expect the sales to be fairly strong).

But the printing expense for each book goes straight to COGS (the PPB part of it), rather than into inventory and from there into COGS.

Does that help?