Startup questions for new business

[Maf. King]

Hi Tufkal,

On Tuesday 09 Nov 2004 06:06, tufkal wrote:
> 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.

IANAA, I can think of two reason off the top of my head to keep that account:  
here in the UK, any interest earned on savings has some portion (20%) of tax 
deducted by the bank. If that applies where you are, you may want to record 
that in it's own account

Secondly, it is usual for business profits to be taxed.  I don't know anything 
about the tax regime where you are, but that account tree may come in useful 
later on...


>
> 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?

Have an expense account (or two)  something like expenses:me:wages and 
expenses:me:electricity.  Then just do a transfer from the business checking 
account to the expenses:me:wages.   Then in your separate, personal accounts 
file, you have a credit to your checking account, coming from eg 
income:refund-electricity

>
> 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.

Not sure about this.  I'll think some more and come back if I can figure out a 
way. I think it will need two transactions, one to record the income and one 
to reduce the inventory.

>
> 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?
>

I agree.  I came to the conclusion that the extra stuff/time you need to use 
the A/P (actually Business -> employees) for doing expenses wasn't justified 
by the extra reporting I could do.  The way I do expenses is to have a 
liability:me account, enter all my expenses in there as transfers to the 
relevant expense accounts, and then once a month, transfer from the checking 
to that liability account to clear the balance, and most importantly, write 
me a cheque...

It is kinda A/P without using the A/P system

I wouldn't enter expenses directly into the bank register, unless the number 
of items is small - eg only one or two items per cheque you write.

> 5) I will post an IRC converstion I had that should explain it very well.

And I will snip it from this reply ;-)

Maf.