[GNC] Business Income Statement: manipulating Cost of Goods sold

[Eric Chapman]

Thank you, Adrien.

I knew it was a presentation issue, and was trying to figure out how to 
present it correctly and yet be able to use GnuCash as I *wanted* to :)

I also realize the importance of the inventory accounts and the theory 
behind this. I just know that the amounts and number of transactions are 
minuscule at this point, so I was trying to cut corners. Maybe not a 
good move. Second smiley :)

I was surprised that GnuCash limits the user's ability to debit an 
income account from the Accounts Payable section, so I guess that was 
where I scratched my head and wondered… No biggie. I suppose that 
feature is intended to prevent inadvertent debits to income accounts, 
which I can understand. I can deal with that limitation (feature) in 
GnuCash. And I may just go back and re-do those few transactions with 
inventory accounts.

I agree that COGS is an expense account. But as far as I know it is 
either usually or always presented in the income section of the Income 
Statement, not in the expense section. I would have thought, though, 
that the "Income" or "Expense" attribute would be irrelevant to *where* 
something is presented: *I expected the parent-child hierarchy of the 
Chart of Accounts would control presentation*. I only marked the COGS 
accounts as "Income" after finding out the parent-child hierarchy is 
*not* the deciding factor in presentation, since I perceived that the 
"Income" attribute would put them in the income section of the Income 
Statement. I'm sure it makes sense from a programming perspective since 
the storing of data under the hood should not be determined by possible 
reporting desires. I probably won't put in the effort to learn Scheme – 
as much as I'd like to. Not enough time available for the benefit.

Thanks again!

Eric

On 12/9/23 00:23, Adrien Monteleone wrote:
> Cost of Goods Sold (COGS) is an Expense account, not Income.
>
> What you are looking for is a different type of Income Statement that 
> does not exist in GnuCash. (the basic math is the same, you just are 
> looking for a 'Net Sales' figure by moving COGS to the upper part of 
> the report. This is merely presentational and does not change the 
> nature of COGS being an expense rather than an income account.
>
> Your options are:
>
> 1. Write your own report. (not easy, and you'd have to learn Scheme)
> 2. Manipulate the existing report in a spreadsheet app. (still work, 
> but much easier and little-to-no learning curve)
>
> Also, generally, you *do* want inventory accounts because purchases 
> are *not* the same as COGS.
>
> Here are some generic transactions:
>
> Acquisition of Inventory
> ------------------------
>
> Dr. Assets:Inventory
>   Cr. Assets:Cash
>
> (or Credit whatever account you used to pay for the inventory)
>
> Sale of Inventory
> -----------------
>
> Dr. Assets:Cash
>   Cr. Income:Sales
>
> Accounting for COGS
> -------------------
>
> Dr. Expenses:COGS
>   Cr. Assets:Inventory
>
> (can be a separate transaction if using the Business Features, or all 
> together in one with the sale if done manually)
>
> Buy or find a good Accounting 101 book, and be sure to get official 
> professional advice.
>
> Regards,
> Adrien