On 6/26/2023 5:01 AM, Jeff wrote:
Thanks Michael and David for the helpful suggestions.
It looks like I was sort of on the right track. These write-offs will
be very irregular (have not needed to do any for the last 6 years) so
I think I'll go along the lines suggested by David. Just now need to
get my head around it.
Thanks again
Jeff.
I strongly suggest an "accounting 101 for business". Gnucash automates
much of the bookkeeping process but cannot tell you the correct accounts
to be debiting or crediting. Again with the warning that I am NOT
"qualified" to be giving accounting advice:
NOT "cost of goods sold". That's the expense account where you debit the
cost of goods SOLD. As I indicated, there are other possible ways things
in inventory might need to be written off as an expense. Yes I
understand, in your case would be rare/sporadic. But that isn't a reason
not to have a separate expense from :cost of goods sold:. I don't know
what tax form you file for this business (or schedule if not on a
separate form). But on the ones I have filed "cost of goods sold" is a
line item.
Just suppose you acquired inventory and began selling from it. So you
had "sales" and "cost of goods sold". Before you has sold much of it
there was a fire in your inventory store so remaining inventory had to
be written off. What would be the result IF you did not separate that
expense from "cost of goods sold" and so "cost of goods sold" > "sales"?
Guaranteed that when your filing was examined would be flagged.
Michael D Novack
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