5200expenseNormal balance: Debitbusiness5200 — Materials
Materials and Supplies (6450) get confused constantly, and the test that actually separates them is simple: does this item get delivered to, or installed for, the customer? Lumber framed into a remodel, tile set in a bathroom, parts installed in a repair — all of it leaves the business and becomes part of what the customer is paying for. That is Materials. Something the business consumes internally to keep running — shop rags, cleaning supplies — is Supplies instead.
As an expense, Materials carries a normal debit balance. It sits in cost-of-sale territory alongside Cost of Goods Sold and Subcontractors, meaning it scales with the work actually being done and sold, unlike a fixed overhead cost such as Rent that stays roughly constant regardless of how busy the business is.
One easy double-count to watch for: if a subcontractor supplies their own materials and bills them as part of their invoice, that cost is already captured in Subcontractors (5100) — recording it again here would overstate the true cost of the job.
What belongs here
- raw materials consumed on a specific job or product
- parts installed for a customer as part of completed work
- lumber, tile, fixtures, or similar inventory bought to build or resell something
- materials purchased specifically for a job in progress
What does not belong here
- general shop or office supplies not tied to a specific job — Supplies (6450)
- a durable tool kept and reused across jobs rather than consumed — Equipment (1500) if it has real lasting value
- a subcontractor's own materials already included in their invoice — already captured in Subcontractors (5100), do not record it twice
- materials purchased but not yet used on any job — a judgment call many small businesses accept by expensing on purchase rather than tracking formal inventory
Where it shows up
Shows on the income statement grouped with Cost of Goods Sold and Subcontractors, just below revenue. Together they are what gross profit is measured against, before overhead is subtracted.
Common questions
- What is the real difference between Materials and Supplies?
- Materials get delivered to or installed for the customer as part of the job — they leave with the work. Supplies keep the business running day to day but never go to the customer directly.
- Should I record a subcontractor's materials here too?
- No, not if they already billed them as part of their invoice — that cost is already captured in Subcontractors (5100), and recording it again here would double-count it.