One account for both Income and Expenses possible?

[Adrien Monteleone]

Jeff,

Buying inventory is not an expense transaction. It’s an asset acquisition. (or rather, shift)

See my other reply to the original question.

A purchase of inventory looks like this:

Dr. Assets:Current Assets:Inventory	$100
	Cr. Assets:Current Assets:Cash		$100

(or Bank instead of Cash as the case may be)

This transaction does not affect Total Assets on your balance sheet, it just moves them from Cash/Bank to Inventory, both of which are ‘current’ because they are expected to be liquid within the reporting period. (likely one year)

So you’d go from this:

	Assets:Current
		Cash			$100
		Inventory		$  0
					====
	Total Assets			$100

	Total Liabilities		$  0

	Equity
		Paid-in Capital		$100
		Retained Earnings	$  0
					====
	Total Liabilities & Equity	$100

To this:

	Assets:Current
		Cash			$  0
		Inventory		$100
					====
	Total Assets			$100

	Total Liabilities		$  0

	Equity
		Paid-in Capital		$100
		Retained Earnings	$  0
					====
	Total Liabilities & Equity	$100


The P&L is not affected at all. You have made neither a profit or realized any loss as of yet.

Selling inventory looks like this:

Dr. Assets:Current Assets:Cash			$110
Dr. Expenses:Cost of Goods Sold			$ 50
	Cr. Assets:Current Assets:Inventory		$ 50
	Cr. Liability:Sales Tax Payable			$ 10
	Cr. Income:Sales				$100



Now your P&L looks like this:

	Income:Sales		$100

	Cost of Goods Sold(-)	$ 50

	Gross Margin		$ 50
				====

	Operating Expenses(-)	$  0
				====
	Net Profit		$ 50

(Net profit flows to Equity:Retained Earnings)



Now, the Balance Sheet looks like this:

	Assets:Current
		Cash			$110
		Inventory		$ 50
					====
	Total Assets			$160

	Liabilities:Current
		Sales Tax Payable	$ 10
					====
	Total Liabilities		$ 10

	Equity
		Paid-in Capital		$100
		Retained Earnings	$ 50
					====
	Total Liabilities & Equity	$160


Regards,
Adrien

> On Feb 11, 2018, at 8:49 AM, Jeff Abrahamson <jeff at p27.eu> wrote:
> 
> On 11/02/18 15:03, Robert Heller wrote:
>> 
>> I expect that the OP wants to have an account that represents his stock of
>> vegetables (or whatever). He can actually do that. What you do is think of the
>> vegetables as a kind of currency or comodity or inventory, that is the
>> vegetables themselves are an asset (Assets:vegetables). Then when you sell
>> vegetables the vegetable account is redued and when you buy vegetables the
>> vegetable account is increased. This happens by transactions which transfer
>> "money" from the vegetable account to a bank account (income when you sell
>> vegetables) and when you transfer money from a bank account to the vegetable
>> account (an expense when you buy vegetables). *I* do this which my inventory
>> of thumb drives. GnuCash does not have "inventory" accounts or any way of
>> dealing with inventory as such -- the two "features GnuCash lacks are payroll
>> and inventory management features. Payroll processing is a huge process (not
>> trivial to implement) but inventory management can be "faked" by considering
>> inventory as if it were a currency of sorts, by just having an account with a
>> balance representing the value of the inventory, which then goes up or down as
>> inventory is bought or sold. Since he is a farm, I expect he is growing
>> vegetables, so things are slightly more tricky. Maybe it might be useful to
>> think of his farm like Bitcoin mining -- maybe someone with that sort of
>> experience can describe how to represent a Bitcoin currency and how to
>> represent the mining process -- one would do the same with growing vegetables
>> somehow.
> 
> That is enticing, and I've contemplated doing the same.  But, unlike a
> currency, which is a durable form of value that (except for currency
> traders) does not constitute P&L, the vegetables also should show up in
> income and expense accounts.  I'd really love to have our inventory show
> up in our accounting system, but it's even more important to have our
> income and expenses show up, and it seems to be either/or.
> 
>    buy inventory         bank [cx] -> expense [dx]
>    (add value)
>    sell inventory        income [cx] -> bank [dx]
> 
> or faking it with currencies
> 
>    buy inventory         bank [cx] -> inventory [dx]
>    (add value)
>    sell inventory        inventory [cx] -> bank [dx]
> 
> Except in this second case, only my balance sheet changes, not my P&L.
> 
> Did I miss something?
> 
> (This is moving away from OP, but a common theme here and one that I'd
> like to understand.)
> 
> -- 
> 
> Jeff Abrahamson
> +33 6 24 40 01 57
> +44 7920 594 255
> 
> http://p27.eu/jeff/
> 
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