Setting up equipment assets for new business

[davelist at mac.com]

On Jun 28, 2009, at 4:32 PM, Mike or Penny Novack wrote:

>
>>
>> Now I'm off to google some more for how to add items to inventory  
>> which
>> were not directly purchased (no offsetting cr to cash). Google is not
>> helping so far - lots of stuff for huge corporations and special  
>> rules
>> - FIFO, accrual, etc. Haven't found anything relating to a little guy
>> who manufactures his own inventory in his garage.
>>
>> My problem is that I do have a basic understanding of double entry
>> accounting, but I've never had to design a system for a business
>> before. That's a lot more challenging than just understanding that  
>> you
>> debit an asset account to raise the balance.
>>
> That's not particularly hard. You put this inventory down on the  
> books for what it COST you. There were materials used, yes? You  
> don't add in for your time, though this is precisely where a "second  
> set of books" might be a good idea (even though your own time isn't  
> an expense for tax purposes in analyzing your business might be a  
> good idea of being able to determine how your business WOULD HAVE  
> been faring had the goods been produced by purchased labor). In your  
> case you get to "draw" from the profits as this inventory gets sold.
>
> Might I suggest that you might perhaps need to obtain learning  
> materials along the lines of "accounting for the small business",  
> "accounting for the sole proprietorship", etc. Before the days of  
> Google people were able to obtain information like that via a medium  
> known as books. Strange as it might seem in this computer age, those  
> old fashioned things still exist. Use the Internet to search out  
> potentially useful titles. For example, your local library system  
> might have a searchable catalog which you can go after "by subject  
> material" and then once you have found some promising titles let you  
> request the books.
>
> Michael


Another suggestion I would make is to meet with the accountant you  
plan to have do the taxes for the business (unless of course, you  
intend to do them yourself). Paying him/her for a few hours of his/her  
time upfront to help you set up everything up so he/she has everything  
they need to do your taxes in the way that will make it easy for them  
will save you hassles down the road.

Dave