Resource guide
Inventory is where cannabis accounting, tax strategy, and regulatory compliance all converge. It is also the account most likely to be wrong. Getting inventory right makes 280E defensible, makes margin reporting meaningful, and makes an examination survivable.
Maintain a perpetual inventory subledger with quantity and cost by SKU and batch. Every receipt, transfer, conversion, sale, waste event, and adjustment posts to it. A periodic count-and-plug approach loses the batch-level cost detail that a producer needs for cost of goods sold.
Cultivators and processors capitalize direct materials, direct labor, and allocable indirect production costs into work-in-process and finished goods. Allocation bases — square footage, plant count, machine hours, labor hours — should be chosen once, documented, and applied consistently.
Aging product, potency decay, and price compression all argue for a documented lower-of-cost-or-net-realizable-value review. Write-downs recorded on a policy are credible; write-downs recorded at year end are not.
Questions specific to your license? Contact our Maryland cannabis CPA team or read the Maryland cannabis accounting FAQ.
Every engagement starts with a working conversation about your license type, your systems, and where your reporting currently breaks down.