Hi Ella, What will follow will probably not solve your problem, but hopefully it will give a better understanding :)
I understand that from your point of view, buying cabbage is an expense.
However, it is not the case here since you’re not making an expense:
you’re swapping dollars (one commodity) for cabbage (another
commodity) at a given rate (1 for 1). An expense would be an entry like:
2018/03/21 Buy cabbage
Expenses:Farm tools $6
Cash
But then you lose track of your cabbages! In other words, you cannot
consider your cabbage both as an expense and as an asset, it has to be
something. In your case, since you want to track its becoming, it’s an
asset. Or, said another way, your $6 has become 6 cabbage, you didn’t
"lose" them.
To see the difference, you can imagine that scenario:
Say that while buying your cabbage at your local grocery store, you used
your credit cards, and that your bank charges you $1 for each
transaction. Also, you buy at the mean time 1kg of carrots at $3. You
would have a transaction like that:
2018/03/21 My best grocery store
Expenses:Bank charges $1
Expenses:Vegetables $3
Inventory:Farm 6 cabbage @ $1
Cash -$10
In that example, the charge expense goes to your bank, so it’s lost
forever (and your bank won it).
The vegetables you have them in your hands, but you don’t want to track
them (they’re lost once you eat them) You could of course track them as
an asset, and tomorrow when you eat them, add an expense of 1kg carrots
from your cellar to expense, but today you didn’t spend money, you only
swapped them for another thing.
And the cabbage you’ve got in your hand will be used later as an asset
(to track its becoming), so it cannot be counted as an expense.
It’s really all a matter of what is an expense (you spent it) and what
is an asset (you get it, and track its becoming)
(Tue, Mar 20, 2018 at 05:38:21AM -0700) Ella Lobatina :
> Ismael, thanks for your write-up.
> For me though net gain = income - expenses.
> That's why I booked the harvested cabbages as income in term of
> commodities, and why not? At the time of selling the ultimate processed
> produce we can apply the market price to the remaining commodity (that
> which is not consumed in the process).
> If you want to apply a price to the cabbages, that would be equal to the
> expenses of plowing the land, planting the seeds, putting fertilizer,
> harvesting etc.
> It's difficult if not impossible to implement the cost of produce like that
> in ledger.
> That's why we aggregate the expenses so that later we can divide them by
> the number of cabbages and calculate their price of production.
>
> Then income - expenses = net gain
>
> Your way of 'finding' the cabbages appears cool to me though.
> And maybe accounting-wise more correct, I don't know.
>
> Thanks for your food for thought!
>
>
> On Tuesday, March 20, 2018 at 12:01:20 PM UTC, Ismaël Bouya wrote:
> >
> > Hi Ella,
> > I think you’re missing something important in your workflow.
> >
> > Your income should be the net gain: At some point, you bought something
> > to start with (or farmed/found them, which should(?) be seen as the same
> > as buying them for $0):
> >
> > 2018/03/21 farm
> > inventory:farm 5 cabbage @ $0
> > cash
> >
> > Those cabbage grow into a salad:
> >
> > 2018/03/21 farm
> > inventory:plant 2 salad @ $0
> > inventory:farm -5 cabbage {$0} @ $0
> >
> > And you sell that salad:
> >
> > 2018/03/21 farm
> > cash $4
> > inventory:plant -2 salad {$0} @ $0
> > income:farm
> >
> > ------------------
> > Now let’s be a little more complete (you’ll adapt it to your need)
> >
> > You buy 6 cabbage at $1 each
> > 2018/03/21 farm
> > inventory:farm 6 cabbage @ $1
> > cash
> >
> > Each of your cabbage is priced $1, and you spend $6.
> >
> > You farm them, you need 2 cabbages to make one salad (I’m not a farmer
> > maybe it doesn’t exist :p ), but a pair of them is lost:
> >
> > 2018/03/21 farm
> > inventory:plant 2 salad
> > inventory:farm -6 cabbage
> > expenses:farm loss 2 cabbage
> >
> > Then you sell those two salad (each costed 2 cabbages, i.e. $2), at $5
> > each:
> >
> > 2018/03/21 farm
> > cash $10
> > inventory:plant -2 salad @ $2
> > income:farming
> >
> > You end up with a $6 net income ($10 - $4 cost), and $4 in your pocket
> >
> > $ ledger bal:
> > $4 cash
> > $-6 income:farming
> > 2 cabbage expenses:farm loss
> >
> > if you want to track the losses in terms of cash, just add costs ("@")
> > in the middle one:
> > 2018/03/21 farm
> > inventory:plant 2 salad @ $2
> > inventory:farm -6 cabbage @ $1
> > expenses:farm loss
> >
> > $ ledger bal:
> > $4 cash
> > $-6 income:farming
> > $2 expenses:farm loss
> >
> > Hope it helps/answer your questions
> > --
> > Ismael
> >
>
> --
>
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> Ismael, thanks for your write-up.
> For me though net gain = income - expenses.
> That's why I booked the harvested cabbages as income in term of
> commodities, and why not? At the time of selling the ultimate processed
> produce we can apply the market price to the remaining commodity (that
> which is not consumed in the process).
> If you want to apply a price to the cabbages, that would be equal to the
> expenses of plowing the land, planting the seeds, putting fertilizer,
> harvesting etc.
> It's difficult if not impossible to implement the cost of produce like
> that in ledger.
> That's why we aggregate the expenses so that later we can divide them by
> the number of cabbages and calculate their price of production.
>
> Then income - expenses = net gain
>
> Your way of 'finding' the cabbages appears cool to me though.
> And maybe accounting-wise more correct, I don't know.
>
> Thanks for your food for thought!
>
> On Tuesday, March 20, 2018 at 12:01:20 PM UTC, Ismaël Bouya wrote:
>
> Hi Ella,
> I think you’re missing something important in your workflow.
>
> Your income should be the net gain: At some point, you bought something
> to start with (or farmed/found them, which should(?) be seen as the same
> as buying them for $0):
>
> 2018/03/21 farm
> inventory:farm 5 cabbage @ $0
> cash
>
> Those cabbage grow into a salad:
>
> 2018/03/21 farm
> inventory:plant 2 salad @ $0
> inventory:farm -5 cabbage {$0} @ $0
>
> And you sell that salad:
>
> 2018/03/21 farm
> cash $4
> inventory:plant -2 salad {$0} @ $0
> income:farm
>
> ------------------
> Now let’s be a little more complete (you’ll adapt it to your need)
>
> You buy 6 cabbage at $1 each
> 2018/03/21 farm
> inventory:farm 6 cabbage @ $1
> cash
>
> Each of your cabbage is priced $1, and you spend $6.
>
> You farm them, you need 2 cabbages to make one salad (I’m not a farmer
> maybe it doesn’t exist :p ), but a pair of them is lost:
>
> 2018/03/21 farm
> inventory:plant 2 salad
> inventory:farm -6 cabbage
> expenses:farm loss 2 cabbage
>
> Then you sell those two salad (each costed 2 cabbages, i.e. $2), at $5
> each:
>
> 2018/03/21 farm
> cash $10
> inventory:plant -2 salad @ $2
> income:farming
>
> You end up with a $6 net income ($10 - $4 cost), and $4 in your pocket
>
> $ ledger bal:
> $4 cash
> $-6 income:farming
> 2 cabbage expenses:farm loss
>
> if you want to track the losses in terms of cash, just add costs ("@")
> in the middle one:
> 2018/03/21 farm
> inventory:plant 2 salad @ $2
> inventory:farm -6 cabbage @ $1
> expenses:farm loss
>
> $ ledger bal:
> $4 cash
> $-6 income:farming
> $2 expenses:farm loss
>
> Hope it helps/answer your questions
> --
> Ismael
>
> --
>
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> References
>
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Ismael
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