Need some help with Split Transactions

[backsolve]

I'm jumping in late on this, so forgive me if this ground has already been 
covered.

In general, I think there is some confusion over what you are charging for 
things like shipping and handling and what you are actually paying for 
them.  That is, once the revenue is in the door, the difference between 
dollars doesn't matter.

So, you've said you charged the buyer $32, but I didn't see anything 
about, (1) the actual cost of the item (or whatever value you currently 
had on the books for it), (2) the actual cost to ship the item.  So, let's 
say these values are A and B, respectively.  In this case, there would be 
a flow of transactions that, for simplicity, could all be smashed into 
one, but I'll break them out here for clarity.

The money comes in the door:

Assets:Checking		$32
Income:Sales			$32

You pay some cash to FedEx:

Expense:Shipping	$B
Assets:Checking			$B

You remove the inventory from your books:

Expense:COGS		$A
Assets:Inventory		$A

Thus, prior to the transaction, all you had was an asset of $A.  After the 
transaction, you have an asset in cash of $(32-B) and a net worth (i.e. 
retained earnings) of $(32-A-B).

To put some hard figures around this, suppose that A=0 and B=2 (i.e. that 
you never had an asset on your books for the item, and you paid $2 to ship 
the thing off).

Before the transaction, you had 0$.  After the transaction, where you got 
paid $32 and spent $2, you now have $30 in cash, and since getting that 
didn't cost you anything (i.e. A=$0), your net worth has increased by $30 
as well.

Finally, if you were to smash all this into one split transaction with 
the dollar amounts I mentioned, you'd get:

Assets:Checking		$30
Income:Sales			$32
Expense:Shipping	$2

which balances as well.




On Mon, 9 Apr 2007, Derek Atkins wrote:

> Hi,
>
> You should read the docs.  Split transactions are described in
> great detail.
>
> Your problem is that you're not thinking about this as Double Entry.
> Try thinking about it in terms of "money entering" and "money leaving"
> the transaction..   At the end of the day, the sum of "money entering"
> and "money leaving" is zero, which means that transaction is balanced
> (i.e., same amount in the debits and credits).
>
> So, you have a total of $32..  That means you need $32 in credits and
> $32 in debits.  So:
>
> Checking        $32
> Ex:Ship                 $10
> In:Item                 $ 2
> In:Handling             $20
>
> BUT.. This isn't quite right, either.  The shipping is on the wrong
> side.  So, more likely it's:
>
> Checking       $32
> In:Ship                $10
> In:Item                $20
> In:Handling            $ 2
>
> (and then if you wanted to you could deal with Ex:Ship, Ex:COGS, etc)
>
> -derek
>
> Quoting K-B <kbalona at yahoo.com>:
>
>>
>> Hello all, I'm having a little trouble figuring out the correct way to enter
>> my transactions, I'm pretty sure it's possible to do it with Split
>> Transactions but I don't understand the split transaction well enough.
>>
>> Here's an example of what I need:
>> I sold XXXX item on ebay for $20.00. The person pays me a total of $32.00,
>> with the grand total broken down like this:
>>
>> Item cost:  20.00
>> Shipping cost: 10.00
>> Handling Charged: 2.00
>> Total: 32.00
>>
>> Now the way I thought I could record a transaction like that in GnuCash is
>> using a Split Transaction, but it doesn't turn out right. My idea was like
>> this:
>>
>> --- In an account called "Income:Ebay Income":
>> - Make a new transaction with $32.00 in the Income field
>> - Split off $10.00 into an account called "Expenses:Shipping"
>> - Split off $2.00 into an account called "Income:Handling"
>> - What's left (20.00) should stay in this account
>>
>> But that method doesn't work! It always comes up with an Imbalance. What I
>> had wanted to do is enter the total amount paid by the customer, then put
>> the Shipping into it's correct account, then the Handling into it's correct
>> account. After I take off those two, what's left would be what the cost of
>> the item was, before shipping & handling. And that would stay in the account
>> where the transaction is based (i.e. Income:Ebay Income)
>>
>> Any ideas on how to achieve this or what I'm doing wrong?
>> --
>> View this message in context:
>> http://www.nabble.com/Need-some-help-with-Split-Transactions-tf3545253.html#a9896928
>> Sent from the GnuCash - User mailing list archive at Nabble.com.
>>
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