[GNC] cost of goods sold, unsold inventory

[Michael or Penny Novack]

On 5/21/2023 7:26 PM, Jamie Tolbert wrote:
> I am slowly wrapping my head around things, kinda stuck on a question 
> about accounting for unsold inventory. Say I bought 10 widgets, for 
> 100 each, my cost of good sold is 1000; I sold 6 for 140 each. My 
> sales is 840, but my cost of good sold is only 600, not 1000, How do I 
> account for the 4 remaining in inventory. 


No, not right, but this is accounting, not gnucash. You will really need 
to look at "accounting 101" material to learn these things.  Although 
not "qualified" to give accounting advice I will discuss your particular 
example. It's one I am quite familiar with, because several of the 
organizations I used to do the books for did tee shirts, etc.

transaction obtaining widgets intended for sale.    This would be a 
debit to an inventory item (inventory under assets) and since each batch 
of widgets bout might be at a different price, an account for each 
batch. And a credit to cash, etc. (whatever account you paid from). Not 
YET a "cost of goods sold" expense as you haven't yet sold any.

transaction reflecting sale of a widget --- This would be a more complex 
transaction. You debit cash  and credit "sales" (income) for the for the 
price of the sale and debit "cost of goods sold" (expense) and credit 
the "batchX" (inventory) for the unit price of widgets in batchX.

Not in MY case, maybe that tee wasn't bought but instead donated to a 
volunteer in recognition of what they did. Then instead of "cost of 
goods sold" the expense account would have been "recognition".

PLEASE -- I am NOT saying that you would necessarily be entering this 
split transaction ofr each and every widget sold. That would depend on 
your daily volume, etc. This in my case, I might have gotten a report 
back from the folks who tabled at some event "we sold 25 tee shirts 
taking in $460." << normally $20/per they might have given a break to a 
family who was getting ones for all of them >>  I begin with a 
transaction to cash and sales for the $460. Now to account for the 
decrease in inventory and cost of goods sold. I see that the current 
batch U with a unit cost of $6.30 had 1o shirts left in it. So debit 
"cost of goods sold" and credit "batch U" $63. That finished batch U 
which can now be hidden. The next batch V had a unit cost of $6.40. The 
remaining 15 shirts came from that batch, so debit "cost of goods sold" 
and credit "batch V" $96. Or I COULD have done it in one complex split 
transactions rather than three simple ones, but especially where sales 
coming form more than one batch would likely do it in separate transactions.

OR -- you might just record the sales (at time of sale) and every so 
often go through remaining inventory with a physical count to determine 
how many were sold from which batch and hence "cost of goods sold" since 
last inventory check. Notice that would not have been an option in my 
case as the orgs were both selling and giving away from the same inventory.


Michael D Novack