Startup questions for new business

[Maf. King]

On Tuesday 09 Nov 2004 19:07, Robert Locke wrote:
> On Tue, 2004-11-09 at 06:42, Maf. King wrote:
> > On Tuesday 09 Nov 2004 06:06, tufkal wrote:
> > > 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.
> >

<SNIP>
>
> As I recall setting up CoA in my old accounting class, there is actually
> another expense category known as Cost of Goods Sold.
>

<sound of a distant bell ringing>

<SNIP>
>
> Now you want to sell the item, so you receive income.  When I bill and
> deliver the product, say $80 in service and $100 in product where the
> product is in inventory valued at $70, I increase Asset:Accounts
> Receivable the total of the invoice $180, and increase Income:Service by
> $80 and increase Income:Product by $100.  Since I delivered the product
> I decrease Asset:Inventory by $70 and increase Expense:COGS by $70.
> When I am paid, I decrease Asset:Accounts Receivable by $180 and
> increase Asset:Checking by $180.
>
> Of course, now I can get reports that show great profit in labor of $80,
> but I can also see the "profit" in product sold of $30, by taking
> Income:Product minus Expense:COGS, my overall profit will be $110 when
> taking all Income accounts minus all Expense accounts.....
>

That all makes sense.  My method made it non-trivial to actually see the 
profit made from selling the goods.  The extra COGS account will make life 
much easier to deduce profit later on.

Maf.