[GNC] Beginner Accounting Question Using GnuCash

R. Victor Klassen rvklassen at gmail.com
Fri Dec 17 07:38:06 EST 2021


There are two kinds of expenses - current expenses and capital expenses (specific terms may vary).  Capital expenses convert one asset (usually money) to another.  Current expenses just deplete an asset (or increase a liability).  In the case where you are converting money to inventory of materials from which to make something, and you are treating that inventory as an asset, you don’t actually get to see the expense.  The real expense occurs when you deplete the assets by making the first notebook.  In the meantime you still have all the paper.  Unless the paper drops in value, which would be depreciation or - if it dropped because of fire or water damage, a different sort of expense, the name of which likely depends on where you are.  

One report that would allow you to see the money move is the cash flow report, which isn’t exactly as its name implies.  For that report you select a subset of your accounts and it tells you what moves in and out of the subset, ignoring anything that happens within it.  So long as your paper inventory is on one side and the money spent comes from the other, it will show up.



> On Dec 17, 2021, at 6:48 AM, Patrick Skelton <patrickskelton at gmail.com> wrote:
> 
> Hi, David,
> 
> Thank you for that. I have actually just kind-of worked that bit out but I
> would like the £8 spent on paper to become an asset. Is it simply then a
> case of entering a transfer from Expenses-Stock Purchases to Assets - Stock
> on Hand?
> 
> Kind wishes - Patrick
> 
> 
> 
> 
> 
> 
> 
> 
> 
> 
> 
> On Fri, 17 Dec 2021 at 11:40, David H <hellvee at gmail.com> wrote:
> 
>> Patrick,
>> 
>> Look carefully at point 2, one side of your transaction should be an
>> expense as you are expending funds to buy stock eg Expense >> Stock
>> Purchases rather than Stock on Hand ?
>> 
>> Cheers David H
>> 
>> 
>> 
>> On Fri, 17 Dec 2021 at 21:20, Patrick Skelton <patrickskelton at gmail.com>
>> wrote:
>> 
>>> Hi,
>>> 
>>> I am trying to get my head around double-entry accounting. I think I have
>>> kind-of got it. I have just set up a stripped down set of accounts and
>>> tried a handful of transactions, to see how they affect profit-and-loss
>>> and
>>> the balance sheet. It all seems to make sense except that there is one
>>> piece of information that seems to vanish, and I am worried this means I
>>> am
>>> doing something wrong.
>>> 
>>> My transactions beginning with all zero balances are:
>>> 
>>> (N*ote:* I have added some dates to give context to my later question)
>>> 
>>>   1. 1st Nov: I pay £100 into the business *Bank* financed by *Owner's
>>>   Equity*.
>>>   2. 2nd Nov: I buy some paper costing £12, which comes from *Bank* and
>>>   goes into *Stock on Hand*.
>>>   3. 3rd Dec: I sell a notepad for £12, which credits *Bank* and is
>>>   assigned to *Income - Sales*.
>>>   4. 4th Dec: I transfer the cost of the paper used to make the notepad
>>>   (£1.00) from *Stock on Hand* to *Expenses - Cost of Materials*.
>>> 
>>> The Balance Sheet shows £111. Liabilities are zero. Retained Earnings are
>>> £11, which gives total equity of £111. Thus the sheet is balanced.
>>> 
>>> My question is that no matter what report I run using whatever dates, I
>>> cannot see the £12 I spent on stock. All I ever see is the £1 that I
>>> decided was the cost of the paper taken from stock.
>>> 
>>> Even if I do reports only for the month of November, I don't see the £12 I
>>> paid for stock because the money came from my bank and went into stock,
>>> which are both Asset accounts.
>>> 
>>> Is there a better way to do these transactions so that I could ask the
>>> question: how much have I spent on stock this month?
>>> 
>>> I am a complete newbie so would welcome any help or advice (short of 'get
>>> an accountant', which I would love to but can't afford).
>>> 
>>> Kind wishes - Patrick
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