Business Accounting Question

[Robert Heller]

At Fri, 11 Mar 2011 16:31:45 -0700 Mark Phillips <mark at phillipsmarketing.biz> wrote:

> 
> 
> On Fri, Mar 11, 2011 at 3:14 PM, Robert Heller <heller at deepsoft.com> wrote:
> 
> > At Fri, 11 Mar 2011 14:56:03 -0700 Mark Phillips <
> > mark at phillipsmarketing.biz> wrote:
> >
> > >
> > > Ok, but how do I handle the check I paid to the merchant for the
> > sweatshirt?
> > >
> > > At time of purchase:
> > > debit merchandise expense $15
> > > credit checking $15
> > >
> > > At time of sale:
> > > Debit checking $25
> > > credit income $10
> > > credit merchandise expense $15
> > >
> > > At the end of the day, my merchandise expense is $0, which does not seem
> > > correct.
> >
> > Ah but it is.  Your merchandise expense was covered by the sale, with
> > $10 'profit'.
> >
> 
> 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.

The difference is that you are not reselling the office supplies.  You
are the end user -- you buy them and use them: the expense is a 'dead
end'.  The merchandise (the sweatshirt) is not something you are buying
to keep or use, it is transient: it comes to you and then you pass it
on to the parents who bought it.  This is a zero-sum transaction: the
money you spent on the sweatshirt is money you get back when you sell
it to the parents -- you don't really spend any of your organization's
money on it, you are only 'fronting' (loaning) the cost on behalf of
the parents -- the parents (the end-users) are paying for it, plus a
$10 surcharge (donation).

> 
> Mark
> 
> >
> > >
> > > I would rather not get into inventory and cogs, if I can avoid it.
> > >
> > > What am I missing?
> > >
> > > Mark
> > >
> > > On Fri, Mar 11, 2011 at 1:46 PM, Paul Schwartz <pmjs1115 at yahoo.com>
> > wrote:
> > >
> > > > given your suggested setup, you/I would credit the merchandise expense
> > > > account for the $15, debit your checking/bank account for $25, and
> > credit
> > > > your income/donation account for $10.
> > > >
> > > > HTH
> > > >
> > > > Paul
> > > >
> > > > ------------------------------
> > > > *From:* Mark Phillips <mark at phillipsmarketing.biz>
> > > > *To:* Gnucash Users <gnucash-user at gnucash.org>
> > > > *Sent:* Fri, March 11, 2011 12:06:24 PM
> > > > *Subject:* Business Accounting Question
> > > >
> > > > I have a US non profit corporation that takes in donations for out two
> > > > softball teams. I recently had new uniforms printed, as well as
> > t-shirts
> > > > and
> > > > sweatshirts for parents. The uniforms belong to the club (ie are
> > returned
> > > > when a play leaves), so I don't allocate the cost of the uniforms
> > against
> > > > the individual donations from each parent. However, when I sell a
> > > > sweatshirt
> > > > with our club logo on it to a parent for $25, and the cost is $15, I
> > have
> > > > to
> > > > deduct the cost of the sweatshirt from the parent's donation. I am
> > having a
> > > > problem thinking through the flow of transactions/accounts.
> > > >
> > > > Simple example: Purchase a sweatshirt for $15, sell to a parent for $25
> > > >
> > > > 1. Pay vendor for sweathsirt
> > > > debit club merchandise expense account  $15
> > > > credit checking account  $15
> > > >
> > > > 2. sell sweatshirt to parent
> > > > credit Income/donation account for parent  $25
> > > > debit some account?? for cost of sweatshirt  $15
> > > >
> > > > But that is as far as I can go. What account do I debit for the $15
> > cost of
> > > > the sweatshirt? How does that account relate to the club merchandise
> > > > expense
> > > > account?
> > > >
> > > > Thanks,
> > > >
> > > > Mark
> > > > _______________________________________________
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> > >
> >
> > --
> > Robert Heller             -- 978-544-6933 / heller at deepsoft.com
> > Deepwoods Software        -- http://www.deepsoft.com/
> > ()  ascii ribbon campaign -- against html e-mail
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> >
> >
> >
> >
> 
>                                                      

-- 
Robert Heller             -- 978-544-6933 / heller at deepsoft.com
Deepwoods Software        -- http://www.deepsoft.com/
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