Business Accounting Question

Fri Mar 11 19:54:34 EST 2011

If it's any help/not more confusion......I help at a small charity playgroup &amp; when we sell merchandise like t-shirts/dvds etc to raise funds it's allocated as follows (using your example of t-shirt costing $15 &amp; selling for $25):

1) Firstly the supplier has been set up as a 'Vendor' &amp; the individual parents have been set up as 'Customers'

2) T-shirt purchased:&nbsp;
Invoice applied to vendor a/c debiting expense merchandise $15 &amp; crediting accounts payable $15. When cheque paid to supplier, a payment is processed on the vendor account which debits accounts payable $15 &amp; credits checking account $15

3) T-shirt sale:
Invoice applied to customer account crediting income merchandise account $25 &amp; debiting accounts receivable $25. When payment received, a payment is processed on the customer account which debits checking account $25 &amp; credits accounts receivable $25

In this way at end of the year you can see how much you spent on merchandise (expense merchandise account $15), how much you sold (income merchandise account $25), profit would be the difference between these totals (income-expense $10), &amp; you'll see what you currently owe the supplier (under accounts payable/vendor report) &amp; also what's owed to you from individual parents (under accounts receivable/customer report)

HTH,
Jane

-- Sent from my Palm Prē
On 11 Mar 2011 23:33, Mark Phillips &lt;mark at phillipsmarketing.biz&gt; wrote: 

On Fri, Mar 11, 2011 at 3:14 PM, Robert Heller &lt;heller at deepsoft.com&gt; wrote:

&gt; At Fri, 11 Mar 2011 14:56:03 -0700 Mark Phillips &lt;

&gt; mark at phillipsmarketing.biz&gt; wrote:

&gt;

&gt; &gt;

&gt; &gt; Ok, but how do I handle the check I paid to the merchant for the

&gt; sweatshirt?

&gt; &gt;

&gt; &gt; At time of purchase:

&gt; &gt; debit merchandise expense $15

&gt; &gt; credit checking $15

&gt; &gt;

&gt; &gt; At time of sale:

&gt; &gt; Debit checking $25

&gt; &gt; credit income $10

&gt; &gt; credit merchandise expense $15

&gt; &gt;

&gt; &gt; At the end of the day, my merchandise expense is $0, which does not seem

&gt; &gt; correct.

&gt;

&gt; Ah but it is.  Your merchandise expense was covered by the sale, with

&gt; $10 'profit'.

&gt;

Now I am really confused. When I buy supplies for the office, I credit

checking account and debit the supplies expense account. At the end of the

year, I can see how much I spend on supplies. Your approach says at the end

of the year, I spent $0 on team merchandise, when I actually spend $10.

Mark

&gt;

&gt; &gt;

&gt; &gt; I would rather not get into inventory and cogs, if I can avoid it.

&gt; &gt;

&gt; &gt; What am I missing?

&gt; &gt;

&gt; &gt; Mark

&gt; &gt;

&gt; &gt; On Fri, Mar 11, 2011 at 1:46 PM, Paul Schwartz &lt;pmjs1115 at yahoo.com&gt;

&gt; wrote:

&gt; &gt;

&gt; &gt; &gt; given your suggested setup, you/I would credit the merchandise expense

&gt; &gt; &gt; account for the $15, debit your checking/bank account for $25, and

&gt; credit

&gt; &gt; &gt; your income/donation account for $10.

&gt; &gt; &gt;

&gt; &gt; &gt; HTH

&gt; &gt; &gt;

&gt; &gt; &gt; Paul

&gt; &gt; &gt;

&gt; &gt; &gt; ------------------------------

&gt; &gt; &gt; *From:* Mark Phillips &lt;mark at phillipsmarketing.biz&gt;

&gt; &gt; &gt; *To:* Gnucash Users &lt;gnucash-user at gnucash.org&gt;

&gt; &gt; &gt; *Sent:* Fri, March 11, 2011 12:06:24 PM

&gt; &gt; &gt; *Subject:* Business Accounting Question

&gt; &gt; &gt;

&gt; &gt; &gt; I have a US non profit corporation that takes in donations for out two

&gt; &gt; &gt; softball teams. I recently had new uniforms printed, as well as

&gt; t-shirts

&gt; &gt; &gt; and

&gt; &gt; &gt; sweatshirts for parents. The uniforms belong to the club (ie are

&gt; returned

&gt; &gt; &gt; when a play leaves), so I don't allocate the cost of the uniforms

&gt; against

&gt; &gt; &gt; the individual donations from each parent. However, when I sell a

&gt; &gt; &gt; sweatshirt

&gt; &gt; &gt; with our club logo on it to a parent for $25, and the cost is $15, I

&gt; have

&gt; &gt; &gt; to

&gt; &gt; &gt; deduct the cost of the sweatshirt from the parent's donation. I am

&gt; having a

&gt; &gt; &gt; problem thinking through the flow of transactions/accounts.

&gt; &gt; &gt;

&gt; &gt; &gt; Simple example: Purchase a sweatshirt for $15, sell to a parent for $25

&gt; &gt; &gt;

&gt; &gt; &gt; 1. Pay vendor for sweathsirt

&gt; &gt; &gt; debit club merchandise expense account  $15

&gt; &gt; &gt; credit checking account  $15

&gt; &gt; &gt;

&gt; &gt; &gt; 2. sell sweatshirt to parent

&gt; &gt; &gt; credit Income/donation account for parent  $25

&gt; &gt; &gt; debit some account?? for cost of sweatshirt  $15

&gt; &gt; &gt;

&gt; &gt; &gt; But that is as far as I can go. What account do I debit for the $15

&gt; cost of

&gt; &gt; &gt; the sweatshirt? How does that account relate to the club merchandise

&gt; &gt; &gt; expense

&gt; &gt; &gt; account?

&gt; &gt; &gt;

&gt; &gt; &gt; Thanks,

&gt; &gt; &gt;

&gt; &gt; &gt; Mark

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&gt; --

&gt; Robert Heller             -- 978-544-6933 / heller at deepsoft.com

&gt; Deepwoods Software        -- http://www.deepsoft.com/

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