Garage Sale

[Phil Frost]

On Tue, Feb 01, 2011 at 11:42:29PM +0200, Aryeh Leib Taurog wrote:
> Okay here's another double-entry accounting question.  I'm not in the  
> business of selling stuff, but I do it on occasion, as part of a spring 
> cleaning/decluttering, because I find a great product at a low price and 
> buy a few to sell, or because I picked something up at the store for a 
> friend.
>
> Say I dig up and sell some old camping gear that I haven't used for  
> years.  It seems to me I could just use a generic income account for  
> occasional sales:
>
> Debit Assets:Cash 20
> 	Credit Income:Other 20
>
> Or use the expense categories I already set up.  I think of this as  
> treating the expense account as a sort of inventory account as well:
>
> Debit Assets:Cash 20
> 	Credit Expense:Camping Gear 20

A search for "cost of goods sold" will give you some insight into how
businesses deal with this problem. However, they purchase goods with the
intent to resell (or use them to manufacture, then sell) them, and take
care to accurately record the cost of their inventory. Probably neither
is true for a garage sale.

You could record income as a negative expense, after all, they are each
change in equity in the current accounting period (search "accounting
equation" for more information). However, to do so would defeat the
purpose of recording them separately in the first place. Is making
$500/wk and spending $450 of it the same as making $50/wk? If you spend
all of your paychecks do you not have to pay income tax?