I purchase fabric and materials that go into the final product (fabric, thread, interfacings). I also purchase items that are consumed during the manufacturing process (pattern paper, rotary blades, etc.). Do I classify each of these things as "cost of purchases" or "materials and supplies"? Where would I put items such as labels?

This is what I learned from a friend - Purchases are things that you buy and then can immediately resell - like for me books. Materials and supplies are the things that go into making a product or are used up in creating it - like staples, glue, paper.

Therefore, depending on your business structure and taxable income, recording the purchase as job supplies, instead of inventory, may save you up to $18,500 in federal income tax in 2022.

Individuals purchase supplies to support their business's operations. These supplies may help ensure the business functions smoothly or enable employees to perform their daily tasks. Meanwhile, inventory represents items that companies purchase or produce to sell to customers and make a profit.