Jeff, Buying inventory is not an expense transaction. It’s an asset acquisition. (or rather, shift)
See my other reply to the original question. A purchase of inventory looks like this: Dr. Assets:Current Assets:Inventory $100 Cr. Assets:Current Assets:Cash $100 (or Bank instead of Cash as the case may be) This transaction does not affect Total Assets on your balance sheet, it just moves them from Cash/Bank to Inventory, both of which are ‘current’ because they are expected to be liquid within the reporting period. (likely one year) So you’d go from this: Assets:Current Cash $100 Inventory $ 0 ==== Total Assets $100 Total Liabilities $ 0 Equity Paid-in Capital $100 Retained Earnings $ 0 ==== Total Liabilities & Equity $100 To this: Assets:Current Cash $ 0 Inventory $100 ==== Total Assets $100 Total Liabilities $ 0 Equity Paid-in Capital $100 Retained Earnings $ 0 ==== Total Liabilities & Equity $100 The P&L is not affected at all. You have made neither a profit or realized any loss as of yet. Selling inventory looks like this: Dr. Assets:Current Assets:Cash $110 Dr. Expenses:Cost of Goods Sold $ 50 Cr. Assets:Current Assets:Inventory $ 50 Cr. Liability:Sales Tax Payable $ 10 Cr. Income:Sales $100 Now your P&L looks like this: Income:Sales $100 Cost of Goods Sold(-) $ 50 Gross Margin $ 50 ==== Operating Expenses(-) $ 0 ==== Net Profit $ 50 (Net profit flows to Equity:Retained Earnings) Now, the Balance Sheet looks like this: Assets:Current Cash $110 Inventory $ 50 ==== Total Assets $160 Liabilities:Current Sales Tax Payable $ 10 ==== Total Liabilities $ 10 Equity Paid-in Capital $100 Retained Earnings $ 50 ==== Total Liabilities & Equity $160 Regards, Adrien > On Feb 11, 2018, at 8:49 AM, Jeff Abrahamson <j...@p27.eu> wrote: > > On 11/02/18 15:03, Robert Heller wrote: >> >> I expect that the OP wants to have an account that represents his stock of >> vegetables (or whatever). He can actually do that. What you do is think of >> the >> vegetables as a kind of currency or comodity or inventory, that is the >> vegetables themselves are an asset (Assets:vegetables). Then when you sell >> vegetables the vegetable account is redued and when you buy vegetables the >> vegetable account is increased. This happens by transactions which transfer >> "money" from the vegetable account to a bank account (income when you sell >> vegetables) and when you transfer money from a bank account to the vegetable >> account (an expense when you buy vegetables). *I* do this which my inventory >> of thumb drives. GnuCash does not have "inventory" accounts or any way of >> dealing with inventory as such -- the two "features GnuCash lacks are payroll >> and inventory management features. Payroll processing is a huge process (not >> trivial to implement) but inventory management can be "faked" by considering >> inventory as if it were a currency of sorts, by just having an account with a >> balance representing the value of the inventory, which then goes up or down >> as >> inventory is bought or sold. Since he is a farm, I expect he is growing >> vegetables, so things are slightly more tricky. Maybe it might be useful to >> think of his farm like Bitcoin mining -- maybe someone with that sort of >> experience can describe how to represent a Bitcoin currency and how to >> represent the mining process -- one would do the same with growing vegetables >> somehow. > > That is enticing, and I've contemplated doing the same. But, unlike a > currency, which is a durable form of value that (except for currency > traders) does not constitute P&L, the vegetables also should show up in > income and expense accounts. I'd really love to have our inventory show > up in our accounting system, but it's even more important to have our > income and expenses show up, and it seems to be either/or. > > buy inventory bank [cx] -> expense [dx] > (add value) > sell inventory income [cx] -> bank [dx] > > or faking it with currencies > > buy inventory bank [cx] -> inventory [dx] > (add value) > sell inventory inventory [cx] -> bank [dx] > > Except in this second case, only my balance sheet changes, not my P&L. > > Did I miss something? > > (This is moving away from OP, but a common theme here and one that I'd > like to understand.) > > -- > > Jeff Abrahamson > +33 6 24 40 01 57 > +44 7920 594 255 > > http://p27.eu/jeff/ > > _______________________________________________ > gnucash-user mailing list > email@example.com > To update your subscription preferences or to unsubscribe: > https://lists.gnucash.org/mailman/listinfo/gnucash-user > If you are using Nabble or Gmane, please see > https://wiki.gnucash.org/wiki/Mailing_Lists for more information. > ----- > Please remember to CC this list on all your replies. > You can do this by using Reply-To-List or Reply-All. _______________________________________________ gnucash-user mailing list firstname.lastname@example.org To update your subscription preferences or to unsubscribe: https://lists.gnucash.org/mailman/listinfo/gnucash-user If you are using Nabble or Gmane, please see https://wiki.gnucash.org/wiki/Mailing_Lists for more information. ----- Please remember to CC this list on all your replies. 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