[GNC] GNC] Question about Assemblies

Tue Mar 22 12:49:35 EDT 2022

David,

Derek described a way to handle a (simple) retail business with GnuCash. Manufacturing is another matter entirely and involves an accounting specialty named Cost Accounting. Enterprise resource planning, or ERP, is one flavor of cost accounting widely used in many industries. There are others, for example the integrated circuits industry uses a system called standard cost accounting. ERP doesn't work because aside from the wafers only tiny amounts of some of the process inputs actually end up in the product so it's not possible to create a meaningful BOM. In standard cost accounting each step in the process is assigned a standard cost and WIP accumulates the standard costs for each step in the process.

There are a few open-source ERP packages available. GnuCash is definitely not one of them and doesn't aspire to be.

Regards,
John Ralls

> On Mar 22, 2022, at 6:46 AM, davidvernonlong at gmail.com wrote:
> 
> Hi Derek,
> I meant that a half decent accounting system which has an inventory system would have those features, and am sorry if my statement was misunderstood. I use GnuCash to maintain a set of accounts for a boat club with nearly 100 members and it is excellent for that, and I use the business aspects as I have members as customers for service/fees etc.
> On your points, of course GnuCash can track costs of inventory in its G/L, but when it comes to recording inventory levels to manage a manufacturing business, quantities are really needed ,either in the system , or in an external system.  Then you would need to link the 2 systems, either automatically or manually. If manually then ,to move raw materials after manufacture to finished product, calculations would have to be done outside GnuCash to multiply  quantity and unit cost of each item consumed to provide total cost , and then manual postings to GnuCah General Ledger for total cost (Cr raw materials/ Dr finished goods) and the same for sales to move from finished inventory to cost of sales (Cr finished goods/Dr Cost of goods sold). 
> To make it more complicated this has to be done on as FIFO or average cost basis, depending on the jurisdiction, as particular items will be purchased many times for inventory and taken out of inventory for consumption, at different times and different quantities. An accounting system with inventory management does this for you. To do this semi manually in Excel and then use the result to make a journal to GnuCash could  be a lot of work depending on the number of transactions.
> 
> When you say "Similarly, when you make a Customer Invoice, you can pull from an Asset instead of Income", this would not be correct. The sale must still be an income account, (Cr Income/ Dr Receivables)and you would need a further  entry, the one I describe above, to calculate the cost of the inventory reduction and record cost of sales as an expense.
> 
> On the maintenance of recipes , all major accounting/ERP systems designed for manufacturing have bill of materials, sometimes called recipes or formulations in process industries. Just replace no of items with litres, kg or whatever. However, GnuCash makes no pretence to be an ERP system in a manufacturing environment, and is great at what it does.
> 
> I do see though that SAGE has a Bill of Materials System:
> " Bill of Materials
> Monitor, control, and cost your manufacturing processes for businesses involved in light manufacturing assembly, helping to simplify complex process and analysis. Includes using multiple BOMs with different options for sub-assembly builds, stock, or multiple units of measure."
> 
> Thanks for your work on developing the business aspects of GnuCash, which is much appreciated, in my boat club now I have retired from the Chemical Industry.
> Best
> David
> 
> 
> 
> 
> -----Original Message-----
> From: Derek Atkins <derek at ihtfp.com> 
> Sent: Tuesday, 22 March, 2022 11:40 AM
> To: David Long <davidvernonlong at gmail.com>
> Cc: D. via gnucash-user <gnucash-user at gnucash.org>
> Subject: Re: [GNC] GNC] Question about Assemblies
> 
> David,
> 
> On Tue, March 22, 2022 2:32 am, David Long wrote:
>> Best to use system which has inventory accounting as then you won't 
>> have to worry about accounting double entry as system will generate it 
>> for you automatically.
> 
> Perhaps...
> 
>> When you enter a purchase invoice it will have a quantity purchase 
>> field so item will be put into stock at cost and quantity. Then there 
>> will be a manufacturing transaction which will take it out of raw 
>> materials and into finished stock (assemblies) at cost and quantity.. 
>> When it's sold it there will be a sales transaction in quantity and 
>> price which will generate an invoice and take item out of finished 
>> product stock in quantity and cost, and then calculate the sales less 
>> cost of goods sold so you know your margins
>> 
>> Hardly any of this can be done by GnuCash so you will need to use 
>> spread sheets and have a course in accounting.
> 
> I would argue this statement is incorrect and misleading.  Indeed, I would say *MOST* of this can be done in GnuCash, although it might not be as seamless as it could be.  For example, when you make a Vendor Bill in GnuCash, you can send it into an Asset instead of an Expense (which includes Stock/Mutual accounts).  Similarly, when you make a Customer Invoice, you can pull from an Asset instead of Income.
> 
> The difference in the sale and purchase of the asset is your Income (margin).
> 
> I agree that this is not as seamless as it could be in GnuCash (I admit, when I originally wrote the business features I did it from the point of view of running a consulting company, not a manufacturing company -- but I did attempt to add the features to make the latter *possible*, if not necessarily seamless).
> 
>> Plus ,a half decent accounting system which has inventory accounting 
>> would also have sales and purchase order management and a bill of 
>> material system to hold your soap recipes.
> 
> So having an inventory system is a requisite for an accounting package to be "half-decent"?  Huh?
> 
> The "Job" feature of GnuCash was an attempt as a purchase-order solution. 
> There was also the concept of an "Order" (which was an attempt at something between a PO and a Quote), but those were never completely
> finished and I believe have since been removed.   That notwithstanding, I
> would argue an accounting program is NOT the right place to maintain recipes.
> 
>> David
> 
>> Please remember to CC this list on all your replies.
>> You can do this by using Reply-To-List or Reply-All.
> 
> -derek
> 
> -- 
>       Derek Atkins                 617-623-3745
>       derek at ihtfp.com             www.ihtfp.com
>       Computer and Internet Security Consultant
> 
> 
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