Q re use of GnuCash for Startup Business

[John Ralls]

On Jan 11, 2014, at 2:19 PM, Anonymous User <anonymoususer.cleveland at gmail.com> wrote:

> I've come to gnucash as I despise Quicken and as a result decided not to
> even try Quickbooks.
> 
> 
> 
> (I did search for an answer before asking here.)
> 
> 
> 
> At the beginning of the year, I decided to turn a hobby into a (very) small
> business. I make handmade soaps.
> 
> 
> 
> I work at a normal job, so this startup will be a very gradual process for
> me.  I plan to use "extra" cash as I have it, to fund the purchase of
> supplies to make soap until I have a sufficient inventory to offer it for
> sale.  I'm estimating this will take about two months.
> 
> 
> 
> Anyhow, how do I enter my initial purchases in gnucash for supplies that
> I've paid for out of my personal checking or credit card account?
> 
> 
> 
> I have no accounting or business background, but nor am I stupid, so if you
> can provide me a link or advice, I probably can take it from there without
> requiring too much hand holding.
> 
> 
> 
> I thank you for your time and consideration.
> 

You need to get some accounting and business knowledge, so go read a basic accounting book. Make sure that it covers accounting for manufacturing, because if you do that part wrong you’ll get in trouble with the tax folks. You can also read http://www.gnucash.org/docs/v2.6/C/gnucash-guide/, though it doesn’t have anything to say about accounting for inventory and costs of goods sold and all that.

It’s wise to keep separate books, and you can treat purchases from your personal money as either a loan or as purchasing the business, or as some combination. There are legal as well as tax implications of the choice, and it wouldn’t hurt to read a basic business law book as well. You’ll also need to get up to speed on the tax requirements for your jurisdiction, and for that you’ll probably need to spend at least a little time with an accountant making sure that your books are set up correctly so that you don’t get in trouble.

Regards,
John Ralls