The first question I’d ask is where does that money collected from the Etsy
sale go?
Does it get auto-deposited into a bank account, or do you have to transfer it
manually? (like Paypal)
Let’s assume it’s auto-deposited. (more like a regular merchant account with a
credit card company)
To keep some sanity, I’d also rename the parent top level ‘Income’ account to
‘Revenue.’ Or you could add a separate top-level Revenue account as type Income
and only put business data there. (draws or payments to your wife from the
business would translate to a personal Income account in that case)
I’ll also for simplicity assume a product cost of $5.00.
Here’s how I’d record that transaction:
Dr. Assets:Business:Current Assets:Bank $16.32
Dr. Expenses:Business:Fees:Etsy Sale Fees $ .76
Dr. Expenses:Business:Cost of Goods Sold $ 5.00
Cr. Revenue:Sales:Product $10.00
Cr. Revenue:Shipping $ 6.65
Cr. Liability:Business:Sales Tax Payable $ 0.43
Cr. Assets:Current Assets:Business:Inventory $ 5.00
This shows you charged the customer $17.08.
Of that, $16.32 went into your business bank account, and 76¢ was retained by
Etsy as a selling fee. (an expense)
The total sale was based on a $10 product, $6.65 shipping fee, and you
collected Sales Tax on behalf of the government of 43¢.
Sales Tax is NOT income. It is money you collect in-trust for someone else. It
was never yours.
Accumulate what you collect into a Sales Tax Payable liability account. When
you make your payments (likely monthly) to the local jurisdictions, you balance
that between your bank account and the Sales Tax Payable account. Sales Tax is
NOT a business expense.
I’m also making the assumption that you charge for shipping, but pay the
carrier separately. (perhaps weekly or monthly, even one at a time to the Post
Office) If Etsy handles order fulfillment that’s a different story and requires
a different approach. You could possibly treat this as a liability-payable
similar to sales tax if the amount is calculated in real time and you know that
is the actual shipping cost. But if you’re doing a separate shipping charge but
might pay more or less to the carrier when actually sending it, you need to
handle that money as revenue. (note, I help some small businesses with their
e-commerce sites and they NEVER pay exactly what was calculated even in real
time for shipping. The carriers always have a discrepancy)
When you pay the shipping carrier enter this transaction:
Dr. Expenses:Business:Postage
Cr. Assets:Current Assets:Bank-Business
An Income Statement after that one transaction and you paying the shipping
carrier, using only business accounts would look like this:
Revenue
Sales:Product $10.00
Shipping $ 6.65
======
Total Revenue $16.65
Cost of Goods Sold $ 5.00
Gross Revenue $11.65
Expenses
Fees:Etsy Sale Fees $ .76
Postage $ 6.65
======
Total Expenses $ 7.41
======
Taxable Income $ 4.24
Notice that Sales Tax appears no where on that statement. It is neither
income/revenue nor an expense. It is merely pass-through money. (but the
payable will show up on your Balance Sheet if the account is not zero when you
run the report)
Assuming you started with only that one product in inventory and no cash on
hand with no other liabilities, here’s what the Balance Sheet would look like
after that sale, after paying the shipping carrier, but before remitting the
sale tax to the government:
Assets
Business:Bank $ 9.67
Inventory $ 0.00
======
Total Assets $ 9.67
Liabilities
Sales Tax Payable $ .43
Equity
Owner’s Equity $ 9.24
======
Total Liabilities & Equity $ 9.67
Regards,
Adrien
> On Jan 15, 2018, at 2:35 PM, sszd <[email protected]> wrote:
>
> http://gnucash.1415818.n4.nabble.com/file/t377851/Sale_Sample_3.png
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