> On Feb 11, 2018, at 9:57 AM, Robert Heller <hel...@deepsoft.com> wrote:
> At Sun, 11 Feb 2018 15:51:30 +0100 Jeff Abrahamson <j...@p27.eu> wrote:
>> On 11/02/18 15:46, Robert Heller wrote:
>>> Here is a "practical" application:
>>> Lets say you buy a case of tomatoes for $10 -- this would be a transaction
>>> from your bank account (for the check you gave the vegetable wholeseller) of
>>> $10 to your Assets:vegetables account. (It is not actually an expense!).
>>> you sell that case of tomatoes for $12. This would be a split transaction:
>>> from your Assets:vegetables account and $2 to an income account. The $12
>>> come from whatever account the $12 was paid into (eg "Cash" if it was a cash
>>> transaction). This brings the Assets:vegetables down to zero (you have no
>>> vegetables in stock right now). At the end of the year you generate a report
>>> showing the Assets:vegetables at the beginning of the year and and the end
>>> the year. The difference is your "cost of goods sold" -- this is what goes
>>> your tax form (actually, the form has your inventory at the beginning of the
>>> year, and your inventory at the end of the year, plus whatever you spent to
>>> acquire your inventory during the year, at least that is how the 1040C form
>>> works and I guess theo 1040F is similar).
>> Our emails crossed. I see what you mean, but I don't think the tax
>> authorities would find that particularly legal here. It would also make
>> VAT computations impossible, I think, although we are exempt from VAT.
> If VAT is anything like Sales Tax, the sales transaction would include all of
> the pieces as parts of the "split". This is what I do:
> gross cash/payment in => 1) reduce inventory account by the cost of the goods
> 2) sales tax on the transaction to the sales tax
> 3) whatever is left over to an income account (this
> will show up on your P&L report)
Be sure #2 posts to a "Liability:Sales Tax Payable" (or VAT Payable) account,
and not a tax expense account.
#3 is not correct, and there are two splits missing.
You should have this for every sale (I’m assuming cash payment, adjust as
Dr. Assets:Current Assets:Cash
Dr. Expenses:Cost of Goods Sold
Cr. Liability:Sales Tax Payable
Cr. Assets:Current Assets:Inventory
The 1st split is the total amount received as payment.
The 2nd is your #1
The 3rd is your #2
The 4th is 1st split - 3rd split. (the difference between amount received and
the sales tax, that is, the pre-tax sub-total amount of the actual sale)
The 5th is the same as 2nd (COGS debit and Inventory credit should balance
between themselves, this could be a separate transaction)
Dealing with a VAT or an otherwise inclusive tax jurisdiction/rule is a little
messier but similar. (depends on the local laws)
> Yes, the only real gotcha is that vegatables are not durable goods, so you
> have to account for spoilage somehow.
Expenses:Cost of Goods Sold:Spoilage
Either expense these with a credit against inventory as needed/identified
(ideally), or periodically with a reconciliation count of inventory.
> It is possible to group things:
> (And further subdivide -- Assets:Inventory:Vegetables:Tomatoes,
> Assets:Inventory:Vegetables:GreenBeans,etc. It would depend on the level of
> detailneeded and you can generate reports using the accounts at different
> levels, depending on what you need.)
>> Thanks for explaining clearly!
> Robert Heller -- 978-544-6933
> Deepwoods Software -- Custom Software Services
> http://www.deepsoft.com/ -- Linux Administration Services
> hel...@deepsoft.com -- Webhosting Services
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