"Set up Suggetions"

Andrew Sackville-West andrew at swclan.homelinux.org
Wed Sep 10 00:42:30 EDT 2008

On Tue, Sep 09, 2008 at 08:50:04PM -0400, Mike or Penny Novack wrote:
> LaMark Lee wrote:
> >Hello, I'm a young entreprenuer in need of a small business transfer/transaction system that works simultaneous w/ a chart of accounts similiar to the common set up. I'm buying a bulk order of wholesale t-shirts then paying screen printing service ( 5.00 per shirt) then resale at retail (19.99) pricing. I need a way to record business expenses of good/services (t-shirts and screenprinting) , the return (14.99)/recoupment(5.00) of sales and in seperate accounts to determine profit/loss every month w/ reports. The reason why I would have profit loss is because of t-shirt giveaways for marketing, t-shirt donations and selling shirts less than wholesale price (5.00). I also might resale some t-shirts at wholesale prce to promote. I doing so I'm not losing money. How would I record this as well. Contact me whenever you get a chance. Thanks!
> >  
> >
> First step is to learn enough "accounting for the small business". In 
> other words, if you don't know HOW you would be doing this the old 
> fashioned way with pen and ink on paper then GnuCash won't help much. 
> What acountign software like GnuCash does for you (and does very well) 
> is autoposting journal to ledger checking every step of the way that you 
> remain in balance and never mistranscribing an number -- 99% of the 
> errors in old fashioned bookeeping being transcription errors or math erros.
> But for this little example:
> 1) What you pay out for the tee shirts and what you pay to get them 
> printed are NOT expenses. They represent the cost of acquiring inventory 
> for sale (an asset).
> 2) As you sell tee-shirts, your sales coming in are transactions split 
> between "income" and reducing the value of inventory.
> 3) "Selling" some at cost for promotions? Well you probably want to keep 
> track of how much you "spent" on promotions. So instead of JUST 
> increasing cash and reducing inventory the same amount you might use a 
> more complex set of transactions.

maybe you record the sale as the usual full amount and then add a
split for "marketing" that reduces the amount of the transaction to
the "cost" amount that matches the actual cash received. You would be
booking more in sales but an offsetting expense also gets recorded. 

This is actually how I handle discounts and comps in my
business. Obtaining useful, accurate information about where discounts
come from and recording adjusted sales figures is a *huge* process for
me. And it prevents me from knowing the percentage of sales that went
to discounts and comps. These transactions actually get hidden from
the books if I record the net amounts. So I record a sales amount that
represents all of our sales as if they happened at full price and then
I record offsetting expenses that result in a net deposit that matches
the actual dollars received. I don't know how accepted this is, but it
works for me. 

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