[GNC] Question about Assemblies

[Adrien Monteleone]

Fred, please be sure to always copy the list address on all replies so 
the discussion stays on the list.

That way, others can benefit from the discussion, as well as chime in 
and help out.

Also keep in mind, we don't give accounting advice here. If you need 
such advice, you need the services of an accountant.

But once you know 'what' to do, we can help you with the 'how to do it 
in GnuCash.'

-----

I am not familiar with Sage so I can't explain how GnuCash works in 
reference to what you were doing before.

There is no inventory management in GnuCash.

You can set up accounts to track the *value* of your inventory, but not 
the quantity. (at least not out of the box, and without lots of work)

You should make entries when you purchase ingredients/materials.

Then you should make entries when you assemble or make something from those.

Then you make more entries when you sell the assembled products.

Basic Accounting Generic Examples
---------------------------------

When you purchase ingredients for soap:

Dr. Assets:Inventory:Raw Materials
Cr. Assets:Bank

This 'moves' money from your bank account to 'Raw Materials'. (which is 
now in the form of Inventory, so this records the value of that inventory)

When you make the soap:

Dr. Assets:Inventory:Work In Progress
Cr. Assets:Inventory:Raw Materials

This moves that value from Raw Materials to inventory 'in production' 
but not yet finished. (this step may be optional for you if the time 
involved in production is rather short, like one day or less and you 
package as part of the basic production process.)

When you package the final product ready for sale:

Dr. Assets:Inventory:Finished Goods
Cr. Assets:Inventory:Work In Progress

This moves the value from 'in production' to its final state as a 
Saleable Good or Finished Product.

When you sell a finished product:

Dr. Assets:Cash
Cr. Revenue:Sales
Dr. Expenses:Costs of Goods Sold
Cr. Assets:Inventory:Finished Goods

For this last one, the value of the first two splits should be equal, 
and the value of the last two splits should be equal. (but they will of 
course be less than the first two, or else you aren't making a profit!)

The first two splits record the receipt of payment (could be 
'Undeposited Funds' if by Credit Card or Paper Check instead of 'Cash') 
and 'recognizes' the revenue earned. (by type, in this case 'Sales Revenue')

The second two splits move the value of the inventory sold out of 
inventory entirely, and records it as an expense of doing business. 
(which will eventually be subtracted from revenue to obtain 'income', 
Revenue - Expenses = Income) The Profit & Loss Report or Income 
Statement Report (same report - different names) will handle that math 
for you.

Your actual transactions may differ, but this is a 'big picture' 
overview of the generic inventory-to-sales process.

------

The math for figuring out the value of raw materials that go into a 
product that you'll need for making those 'in progress'/'finished goods' 
entries in GnuCash is something you're going to have to setup outside of 
GnuCash in a spreadsheet or other inventory management software.

If you like, it is possible to export the result from the spreadsheet or 
other software into GnuCash so you don't have to manually cross-enter 
anything.

If you only have one or a small handful of products you only need do the 
math by hand once, and then you can just duplicate those transactions 
changing the dates.

You can also put in the Memo fields the proportions of each ingredient 
as a reminder, then enter that as a math equation in the transaction 
instead of just a final number. GnuCash can do the calculations for you.

------
There are no shortcuts if you're going to do your own accounting. You 
just have to learn it.

It really isn't difficult, and you don't have to learn 'all' of 
accounting, just what you need for your business. (and you won't learn 
it all at once, most likely, as you find out you need to know it)

Accounting is not about difficult or fancy math. The hard part is 
learning 'how to account' properly for your activity. That's it.


Regards,
Adrien

> On Mar 17, 2022 w12d76, at 10:20 AM, Frederick <frederick at justsoap.com> wrote:
> 
> Hi Adrian, thanks for your response.  
> 
> Unfortunately i am a bit confused by it, however.  I am sure this comes from being as guy who makes soap and the accounting is done, only as a necessity and not by way of my profession.  I am definitely trying to avoid taking an accounting course (-:  
> 
> I am a maker of stuff that wants to track assembly-build  (Sage 50 terms) as i do now with my Sage 50 software.  I set up my system to purchase ingredients and then Assemble-Build these ingredients into finished goods that i sell.  I track quantities and value of ingredients and finished goods. I am looking for a different platform to do this tracking, both monetary and quantity.  It sounds like you are saying the monetary tracking is possible but the quantity/item tracking is not.  Sage 50 does both and i make use of both features.
> 
> There is a response to this question by a Liz.  I am not sure how to keep the question and responses from branching out to multiple threads.  I hope the above and below responds to her questions.
> 
> This was set up 10 plus years ago and i do not even recall what might be meant by how you account for manufacturing costs when you invoice, nor how you spread this income in your accounts. 
> 
> Thanks for the help and my apologies if my very limited understanding of accounting makes your responses difficult for me to comprehend.  There is every possibility that I just need to look for a less accountant based system.  I make soap and just do the accounting to permit the soap making.