How to Record CO2 for Extraction Processing
Accounting for the purchase of CO2 used as a solvent in the manufacturing of cannabis concentrates.
| Account Name | Type | Debit ($) | Credit ($) |
|---|---|---|---|
| Raw Materials - Solvents (CO2) | Debit | 3,500.00 | - |
| Accounts Payable | Credit | - | 3,500.00 |
💡 Accountant's Note
CO2 used in extraction is treated as a raw material or direct consumable. Under 280E, for producers, these costs are generally inventoriable and deductible as COGS when the product is sold.
Practitioner & Systems Framework
💻 ERP Architecture
Set up CO2 as a non-tracked inventory item if bulk tank levels are difficult to measure daily, or use a standard cost per run.
⚠️ Audit Flags
Excessive solvent purchases relative to concentrate output may indicate yield inefficiencies or unrecorded sales.
📄 Required Documentation
Vendor invoices, safety data sheets, and extraction batch logs showing solvent usage.
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Related Journal Entries
Cannabis & Regulated Substances
IRC §280E — Complete Disallowance of Ordinary Business Expenses (Cannabis-Specific Tax Law)
Cannabis & Regulated Substances
§471 Inventory Cost Capitalization — Maximizing COGS for Cultivators Under §280E
Cannabis & Regulated Substances
Biological Assets — Growing Cannabis Plants at Fair Value (IAS 41 for Canadian Companies)
Discussion & Community Questions
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