Startup questions for new business

[tufkal]

I have been running a small business for about 6 months now and my
bookkeeping has thus far been a folder of invoices made from a MS Word
tempplate, and reciepts/photocopies of checks for expenses.   I am looking
to integrate this into GNUCash.  I started the process but ran into a few
problems, some of which were answered by the WIKI, some by posts in this
newsgroup, some by a nice fellow in IRC.  The remaining questions I post
to you.

1) Are the Expense:Tax catagories needed if I am not recieving a employer
paycheck on this file?  I assume not since no income I would be recieving
would have those taxes taken out, and no expense I have would fall under
those catagories.

2) What is the best way to facilitate money transfer from this account out
to me/my personal checking account.  I will be doing this for 2 reasons. 
50% of my electric bill is equated to the business since I work at home,
so 50% of the electric bill is added as an expense each month.  I want to
move that amount out to my personal checking account where I will be
writing the check to.  Also from time to time I may need to just shift
money from this account to my personal account, like I am paying myself. 
What is the best way to do this?

3) I bought an item at a local store and resold it.  I entered the item as
an expense from Asset:Checking->Expense:Inventory.   Then I got paid for
the job I did, which was parts and labor.  $80 in labor and $99.99 in
parts.  The expense of the part was $69.99.  How do I correctly recieve
the money against the invoice, paying the Inventory account off and
showing a profit?  Basically, how do I process inventory (no tracking
needed), just the cost/profit.

4) I am torn between 2 ways of doing my monthly bills as expenses.  I
could either enter them manually into the Checking Account registry as
going directly to an Expense account, or I can psot them to AP and then
process a payment.  The advantage of using AP is keeping track of the
vendors/billing parties, but that is also the downside because its a few
extra steps.  I have come to the conclusion that the bills I record as
business expenses each month should be directly entered into the register
for my checking account, and AP only used on long standing bills or open
accounts with vendors.  Comments?  Suggestions?

5) I will post an IRC converstion I had that should explain it very well.
tufkal Trying to setup GNUCash to do the accounting for my business, and had an expert come over and help me.  We ran into some problems and I wanted to ask them here.  We created a new file, using Buisness profile of accounts.  We added a customer, and an invoice for the customer.  Then we posted the payment to take the money from AR to Checking.  He said that the accounting equation was not working, it was not showing a retained earning increa
tufkal se, a profit.  I added some AP and some expenses, still no resolution in Retained Earnings.
jsled tufkal: shouldn't the sequence be: Invoice [A/P] -...-> Payment [A/R->Checking]
jsled ?
jsled I confess that I don't know the business features very well.
tufkal When i created the invoice for the customer, it goes to AR, until they pay.   So then I posted payment for that customer which moves the money from AR to my Asset:Checking account.  WHich all works good but in that process it should show Equity.  Based on the equation which is stated in the FAQ/Manual   Assets - Liabilities = Equity + (Income - Expenses)
jsled No, that's not Equity -- that's Income,
jsled You just got a check.  Income, right?
jsled Equity is what you start with or what -- generally -- exists outside the books./
tufkal I have 6 months of invoices and recorded payments from my business, jsut now putting it into a program.  This was just a test so in the test yes i got a check
jsled Not specifically -- generically.  If you get a customer to write you a check, that check is Income, not Equity.
tufkal But isnt my Equity defined by Assets-Liabilites?  And once its in my checking account, its an asset right?
jsled 1/ Your equity is -- as per a re-evaluation of the formula you provided above: Equity = Assets - Liabilities - (Income - Expenses)
jsled 2/ Once in your checking account, then it's an Asset.  But it's _sourced_ from Income,
tufkal so they cancel out
jsled Yes.  Everything does. :)
jsled Double-entry accounting; _everything_ sums to 0.
tufkal hehehe so my Equity:Retained Earnings should be 0?
jsled That I can't answer.
tufkal what would affect that
jsled I just don't know the semantics of "Retained Earnings" because I'm not familiar with business accounting.
jsled [I'd hazard a guess that "Equity:Retained Earnings" in and of itself shouldn't be 0 ... but should balance with something else to be 0]
tufkal ok well i think i have all the basic principles of adding customers, creating invoices, posting payment, adding bills paid to checking/expenses, and if needed how to use AP for something i dont pay right away
jsled You'd do good to check back in the channel when 'warlord' is around; he wrote the business functionality.
tufkal since I do have a live speaking (they do exist on irc!!) person lemme think quick if i had something else besides the Equity questions
jsled And uses it for his own business.
jsled :)
tufkal In the status bar, I have NET ASSETS and PROFITS.  My NET ASSETS seems to be Assets-Liabilites, but PROFITS shows $0.00
tufkal My assumption is that the PROFITS value there is tied into Equity which we have decided is not right in my file yet
jsled Hmmm.
jsled That's about all I can say right now; sorry.
tufkal ok :) thanks for the help


That should about cover it.  I am looking forward to getting this setup! 
Thanks in advance!

Chris