Accounting question

Amit Sathe nsathe@ip.eth.net
Thu, 31 Aug 2000 17:56:51 +0530


The two questions posed are :
1. Should  sales be recogised at $20000 or $22000. I think ( I am not a CA
but halfway through the 4 exams) as follows :
The GST as  I understand is a kind of sales tax. The sellers responsibilty
is to collect the tax from the customer and deposit it into the govt
treasury. so there is really no point in including it under sales, it is
merely a liability.

2. The concept of VAT is similar across countries though the names might be
different. I am not aware about Australian laws but the position in India is
roughly as follows :

a. You collect $200 from the customer.
b. You get credit for tax on your raw material in this case $100.
c. So you deposit only $100 extra with the govt. This means that your cost
of raw material goes down to that extent
It also means that there is no "cascading effect' and "tax on tax". It also
reduces your inventory holding cost.

Thirdly, there are generally either separate or merged systems to maintain
quantitative details of stock. I don't think Gnucash is designed to handle
stock records ie quantities.

Also it is not necessary to pass an ntry for cost of goods. At year end when
stock figures are entered on the credit side of gthe balance shhet it is
automatically  taken care of. So the following entry is unnecessary :
Cost of Goods Sold   $10,000
GST On Sales          $1,000
Inventory - Cost              $10,000
Inventory - GST                $1,000

Hope this is not off  the topic

Regards

Amit Sathe
Pune, India.
>
> Message: 12
> To: gnucash-devel@gnucash.org
> Subject: Re: How do I do this? (Accounting question)
> <39ADD8BD.C02666EA@mail.watersprite.com.au>
> Date: Wed, 30 Aug 2000 23:27:44 -0500
> From: Christopher Browne <cbbrowne@hex.net>
>
> On Thu, 31 Aug 2000 15:02:05 +1100, the world broke into rejoicing as
> Conrad Canterford <conrad@mail.watersprite.com.au>  said:
> > I have some conceptual problems which I'm hoping someone will be able to
> > explain for me. Since they are not specifically gnucash related, private
> > response may be warranted.
> >
> > My problem:
> > I have, up to now, been entering stock (as in, the stuff I sell, not
> > shares in companies) purchases as expenses, and not keeping any sort of
> > accounting in Gnucash of my stock on hand. This is entered in the
> > double-entry stuff as a deduction from the cash account, and an addition
> > to my "Expenses:Stock:xxxxxx" account (depending where it was bought
> > from).
> >
> > However, we are about to get big enough to start worrying about the GST
> > ("Goods and Services Tax"), and this really starts to make it more
> > important that I keep track of my stock on hand as well. My problem is,
> > I cannot visualise how to enter this.
> >
> > I need to deduct money from the bank account. Some of that goes as a
> > pre-paid GST, and the rest is an expense for stock purchase. However, I
> > also need to add that same amount to an asset account "Stock on Hand",
> > don't I? I could enter it straight to the asset account, and not record
> > the expense, but then how do I track my total stock purchases?
> >
> > Similarly on a sale, some of the money goes as a liability for GST
> > payable and the remainder is income, and all of that goes into the cash
> > account. But I also need to deduct the cost of goods sold from my "Stock
> > on Hand" asset account to get that to track properly. I cannot bypass
> > the recording of income - I need this for my tax declarations.
> >
> > So
> > a) How would this be done in a normal double-entry accounting system?
> > b) How do (can?) I do this in Gnucash?
>
> There's probably "more than one way to skin the cat," but I'll hazard
> a guess...
>
> Initial purchase: $10,000 of material purchased, plus $1,000 GST.
>
> Recorded as the transaction:
>                  DR        CR
> Chequing                  $11,000
> Inventory - cost  $10,000
> Inventory - GST     1,000
>
> Then you sell this "lot" for $22,000
>
> Accounts Receivable  $22,000
> Sales                           $20,000
> GST On Sales                    $ 2,000
>
> As well as a transaction recording the expenses:
> Cost of Goods Sold   $10,000
> GST On Sales          $1,000
> Inventory - Cost              $10,000
> Inventory - GST                $1,000
>
> Then you collect from the customer:
> Chequing            $22,000
> Accounts Receivable          $22,000
>
> And pay the tax man...
> GST Expenditure      $1,000
> Chequing                      $1,000
>
> The final resulting balances:
> Balance Sheet - Assets
> Chequing             $10,000
> Inventory                  0
> Inventory - GST            0
> Accounts Receivable        0
>
> Expenses:
> Cost of Goods Sold    10,000
>
> Revenues:
> Sales:                        20,000
>
> Tax Income Statement Accounts:
> GST On Sales                  $1,000
> GST Expenditure       1,000
>
> Note that this all balances to $0, which suggests at least _some_
> degree of correctness.
>
> A "policy issue" would be of just how to treat the GST expenses/revenues.
>
> Open Question:  Should total sales be $20,000, which is the "untaxed"
> portion, or should they be $22,000, the "taxed" amount?  That's a
> question to take to your Chartered Accountant.
>
> Further, I think there would be a way for it to be valid for the
> amounts in the "tax income statement accounts" to be $2,000 rather than
> $1000.  Again, that's a question for an accountant knowledgeable with
> the accounting standards used in Australia.
>
> But the above set of transactions are at least not an _outrageous_
> handling of it...
> --
> aa454@freenet.carleton.ca - <http://www.hex.net/~cbbrowne/linux.html>
> Rules of the Evil Overlord #14. "The hero is not entitled to a last
> kiss, a last cigarette, or any other form of last request."
> <http://www.eviloverlord.com/>
>
>
> --__--__--
>
> Message: 13
> Date: Thu, 31 Aug 2000 12:42:31 +0400
> From: Alexey Kakunin <small@arcadia.spb.ru>
> To: GnuCash <gnucash-devel@lists.gnumatic.com>
> Subject: AutoCompletion in Register and Cyrillic symbols
> Reply-To: small@arcadia.spb.ru
>
> Hi!
> I have downloaded gnucash 1.4.5 and try it.
> It works fine, but I found one problem: autocompletion (quickfill) in
register
> window works incorrectly with rusian symbols (cyrillic).
> After some hacking I found the problem - so I send my patch as attachment
(it
> is very simple :o))
>
>
> Also, I have some question and tips:
>
> 1) Currency - GnuCash allows users to use different currency in different
> accaunts. It is very fine for me, because I usually use two (US Dollars
and Russian
> Roubles).
> But I can not make convertion between accaunts (send some money from USD
> accaunt to RUR accaunt).
> Also, in the total profits and assets (in main window) gnucash just adds
values
> from different accaunts independing from currency used with it (but 1 USD
is
> not 1 RUR, it is 28 RUR!)
> So, for me the currency support is not usable yet. :o( Have anybody any
plans
> to improve support for different currencies?
>
> 2) I think, it is very usefull to have the types of transactions (with
> subtypes) like:
> Food
>  - Milk
>  - Lanch
>  - Restraunt
>  - Bear
> Wear
> ...
> And then I fill transaction in the register window, I can set its type.
> After it, I can get report - how much money I spend to Eat or to Milk
> esspecialy.
> This report can show me this values in percents from common spends.
>
> Have anybody any ideas about it?
>
> --
> Best Regards.
> Alexey Kakunin, M.Sc.
>
>
>
> --__--__--
>
> Message: 14
> From: Dave Peticolas <dave@krondo.com>
> To: small@arcadia.spb.ru
> Cc: GnuCash <gnucash-devel@lists.gnumatic.com>
> Subject: Re: AutoCompletion in Register and Cyrillic symbols
> <20000831124231.C6279@dhcp35.arcadia.intranet>
> Date: Thu, 31 Aug 2000 01:49:34 -0700
>
> Alexey Kakunin writes:
> > Hi!
> > I have downloaded gnucash 1.4.5 and try it.
> > It works fine, but I found one problem: autocompletion (quickfill) in
registe
> > window works incorrectly with rusian symbols (cyrillic).
> > After some hacking I found the problem - so I send my patch as
attachment (it
> > is very simple :o))
>
> Thanks, but maybe you forgot to attach the patch?
> Also, could you please send all patches to 'gnucash-patches@gnucash.org'?
>
>
> > Also, I have some question and tips:
> >
> > 1) Currency - GnuCash allows users to use different currency in
different
> > accaunts. It is very fine for me, because I usually use two (US Dollars
and R
> > ussian
> > Roubles).
> > But I can not make convertion between accaunts (send some money from USD
> > accaunt to RUR accaunt).
>
> Take a look at the online documentation for currency accounts.  It's a
> bit complicated at the momemnt. We are planning on making this simpler
> in the future.
>
>
> > Also, in the total profits and assets (in main window) gnucash just adds
valu
> > from different accaunts independing from currency used with it (but 1
USD is
> > not 1 RUR, it is 28 RUR!)
> > So, for me the currency support is not usable yet. :o( Have anybody any
plans
> > to improve support for different currencies?
>
> Yes, that work is ongoing. The development version of GnuCash does not
> sum different currencies for the Assets and Profit display.
>
>
> > 2) I think, it is very usefull to have the types of transactions (with
> > subtypes) like:
> > Food
> >  - Milk
> >  - Lanch
> >  - Restraunt
> >  - Bear
> > Wear
> > ...
> > And then I fill transaction in the register window, I can set its type.
> > After it, I can get report - how much money I spend to Eat or to Milk
> > esspecialy.
> > This report can show me this values in percents from common spends.
> >
> > Have anybody any ideas about it?
>
> That's a good idea. We are working on a more flexible architecture
> that would allow this to be implemented.
>
> thanks,
> dave
>
>
>
> --__--__--
>
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