Assets and bills

[Derek Atkins]

Dale Alspach <alspach at math.okstate.edu> writes:

> I am not using the business portion of gnucash yet, so part of this is
> based on general accounting.
> You should have an inventory asset account. The label "expense account" is
> not correct in this case. (I have accounting labels turned on but I see
> "expense account" too, Is this a bug -version 1.8.1? )

Well, I don't consider it a bug.  Perhaps it is a missing feature.  At
this point the business code does not have any options in terms of the
column headings.  The terms "Income Account" and "Expense Account"
were chosen because most of the time you're billing an expense and
invoicing an income -- and the old term, "Account", was causing
confusion....

> Because you are selling these items they are an
> asset but of a different type than fixtures, buildings, etc., and usually
> treated diferently in reporting. You expense to a cost of goods sold
> account when an item is sold.
> (The default business account tree does not seem to have the correct set of
> accounts for an inventory based business.)

The 1.8 business implementation does not directly support an inventory
business.  Indeed, it does not directly support inventory at all
(although you could try to use a Stock account -- but be warned that
the invoice/bill code will not properly deal with that.  So, the fact
that the CoA doesn't include inventory is directly related to the fact
that inventory is not supported.

If someone wants to implement an inventory system, the patches would
be gladly accepted.  When I started on the business features I
basically started with the parts that I felt I needed in order to run
my Consulting Business.  Considering I don't have any inventory I
decided that I didn't need to work on that right away.  Nobody else
has offered to help, and I have had little incentive to work on it.

> Purchase inventory:
> 
> Enter bill:
> debit inventory asset
> credit accounts payable

Correct.  Just use the inventory asset account in the column labeled
"Expense Account" and this will do the right thing -- except that it
will not actually keep track of the number of items properly.

> Sell item:
> 
> credit inventory asset for cost of item
> debit cost of goods sold for cost of item
> credit gross income from sales for price of item to customer
> debit accounts receivable (or undeposited funds,  petty cash or checking if a
> cash sale) for price of item to customer

The invoicing system will deal with the second half of this, but not
the first half.

> Dale Alspach

-derek

-- 
       Derek Atkins, SB '93 MIT EE, SM '95 MIT Media Laboratory
       Member, MIT Student Information Processing Board  (SIPB)
       URL: http://web.mit.edu/warlord/    PP-ASEL-IA     N1NWH
       warlord at MIT.EDU                        PGP key available