Recording transactions

[Adrien Monteleone]

The first question I’d ask is where does that money collected from the Etsy sale go?
Does it get auto-deposited into a bank account, or do you have to transfer it manually? (like Paypal)

Let’s assume it’s auto-deposited. (more like a regular merchant account with a credit card company)

To keep some sanity, I’d also rename the parent top level ‘Income’ account to ‘Revenue.’ Or you could add a separate top-level Revenue account as type Income and only put business data there. (draws or payments to your wife from the business would translate to a personal Income account in that case)

I’ll also for simplicity assume a product cost of $5.00.


Here’s how I’d record that transaction:


Dr. Assets:Business:Current Assets:Bank		$16.32
Dr. Expenses:Business:Fees:Etsy Sale Fees	$  .76
Dr. Expenses:Business:Cost of Goods Sold	$ 5.00
	Cr. Revenue:Sales:Product 			$10.00
	Cr. Revenue:Shipping 				$ 6.65
	Cr. Liability:Business:Sales Tax Payable	$ 0.43
	Cr. Assets:Current Assets:Business:Inventory	$ 5.00

This shows you charged the customer $17.08.

Of that, $16.32 went into your business bank account, and 76¢ was retained by Etsy as a selling fee. (an expense)

The total sale was based on a $10 product, $6.65 shipping fee, and you collected Sales Tax on behalf of the government of 43¢.

Sales Tax is NOT income. It is money you collect in-trust for someone else. It was never yours.
Accumulate what you collect into a Sales Tax Payable liability account. When you make your payments (likely monthly) to the local jurisdictions, you balance that between your bank account and the Sales Tax Payable account. Sales Tax is NOT a business expense.

I’m also making the assumption that you charge for shipping, but pay the carrier separately. (perhaps weekly or monthly, even one at a time to the Post Office) If Etsy handles order fulfillment that’s a different story and requires a different approach. You could possibly treat this as a liability-payable similar to sales tax if the amount is calculated in real time and you know that is the actual shipping cost. But if you’re doing a separate shipping charge but might pay more or less to the carrier when actually sending it, you need to handle that money as revenue. (note, I help some small businesses with their e-commerce sites and they NEVER pay exactly what was calculated even in real time for shipping. The carriers always have a discrepancy)


When you pay the shipping carrier enter this transaction:

Dr. Expenses:Business:Postage
	Cr. Assets:Current Assets:Bank-Business	

An Income Statement after that one transaction and you paying the shipping carrier, using only business accounts would look like this:

	Revenue
		Sales:Product		$10.00
		Shipping		$ 6.65
					======
	Total Revenue			$16.65

	Cost of Goods Sold		$ 5.00

	Gross Revenue			$11.65

	Expenses
		Fees:Etsy Sale Fees	$  .76
		Postage			$ 6.65
					======
	Total Expenses			$ 7.41

					======
	Taxable Income 			$ 4.24


Notice that Sales Tax appears no where on that statement. It is neither income/revenue nor an expense. It is merely pass-through money. (but the payable will show up on your Balance Sheet if the account is not zero when you run the report)

Assuming you started with only that one product in inventory and no cash on hand with no other liabilities, here’s what the Balance Sheet would look like after that sale, after paying the shipping carrier, but before remitting the sale tax to the government:

	Assets
		Business:Bank		$ 9.67
		Inventory		$ 0.00
					======
	Total Assets			$ 9.67

	Liabilities
		Sales Tax Payable	$  .43

	Equity
		Owner’s Equity		$ 9.24
					======
	Total Liabilities & Equity	$ 9.67



Regards,
Adrien

> On Jan 15, 2018, at 2:35 PM, sszd <sszdkruk at gmail.com> wrote:
> 
> http://gnucash.1415818.n4.nabble.com/file/t377851/Sale_Sample_3.png