[GNC] How to Reclassify Invoice Amounts

[Diane Trefethen]

Unless I misunderstand your situation, you are a small business, do 
things pretty simply, and do not have a large accounting dept. If this 
is so, then you don’t need to reclassify anything. The total billed for 
your service(s) is Sales and all the “various expenses related to the 
transaction” are booked as expenses when you enter the bills from YOUR 
vendor(s), if you are on the accrual basis, or when you pay your bills, 
if you are on the cash basis. [Side note: One thing you said worries me. 
“Before I started keeping track of sales by invoice I would just splt 
the transaction.” IF you “split the transaction” by breaking the invoice 
total down into income, fees, shipping, etc, what did you book when you 
paid your bills for those items? Take PayPal. If you used to book $1.75 
of the invoice as PayPal Expenses AND you booked your bills from PayPal 
as PayPal Expenses, then you booked each PayPal fee twice. This would 
badly distort your P&L statement because you would be showing less 
revenue than you were actually receiving and more expenditures than you 
actually incurred.]

Be forewarned that Adrien’s additional GL posts like
Dr. Expenses:Insurance                          $192.15
Cr. Assets:Current Assets:Checking                      $192.15
are a mistake if you book insurance, PayPal, and other expenses when you 
enter or pay the bills for those items. Doing it a second time will a) 
throw your checking account out of balance and b) double book your 
expenses which the IRS will NOT be happy about.

There is a misconception that accounting programs can do everything. 
They can’t. There are many things that are better tracked separately 
using spreadsheets and then booked into the accounting program with 
end-of-month GL entries, like pre-paid insurance and accrued interest, 
for example.