you'd enter it exactly as you wrote. Again, some people here are trying to follow GAAP or tax for their specific region. Others may have other desires. So as others have written on this forum, the first questions you should be asking are: what are you trying to track and why? How would you do it with pen and paper? And then there will certainly be a gnucash method to accommodate. People here have suggested all kinds of things to you because you MIGHT be subject to business or other taxation on these sales in your country, or you MIGHT want to track various other things over time.
But (as I wrote to you initially) it's totally fine if (when you sell an instrument) you debit (increase) your checking account with the cash you received, credit (decrease) your asset account by the amount you paid for the instrument, and then credit (increase) an income account (as you suggest below) to reflect that you may have made (or potentially lost) money over time on the sale. That method may very well work for your use case, and you will always see your instruments marked in your net worth as assets at cost. Just recognize that you may or may not be following GAAP or be able to properly handle tax in your jurisdiction if you handle this way. But if your use case is "how much did I spend to purchase the instruments I still have?" and "how much did I make over [xxx period] in instruments I sold", the method you suggest below should work. I used to record all sorts of things when I was a 20+ year Quicken user, and I realized I never ran a single report over some of that information. So when I moved to GC I made sure that the information I keep and track (and my accounts are pretty sophisticated) are things I care about running reports on or tracking in GC. So I am trying to do "just enough", but plenty. On Tue, Sep 24, 2024 at 4:28 PM Boniforti Flavio <bonifort...@gmail.com> wrote: > Hi David. > > In fact I don't buy instruments with the goal of making profit out of them. > I collect and play them too. In fact, for this situation I would simply > account for both purchase and sale as you described. > > So there's no tax implication whatsoever in my case. > > But then... > > I look at my collection of instruments as an asset, not as an expense. I do > own a bunch of vintage instruments, which have the value corresponding to > what I've paid for them. So if I consider this collection to be an asset, > then the suggested accounts you proposed won't work anymore (please correct > me if I'm wrong). > I was thinking more of something like this: > > PURCHASE: > "Asset:Bank Account" decrease > "Asset:Musical Instruments Collection" increase > > It becomes for me more difficult to understand how a sale would have to be > registered, as it not only increases my bank account, but it also decreases > the musical instruments collection - but only of the value I paid for it > when I bought it. Given the fact that many items will increase their value > over time, there might be a surplus. The easy example is: I bought item A > in 2002 for 1000 and I sell it now in 2024 for 2000 --> my collection > account would decrease by 1000, my bank account would increase by 2000 but > where do I put the surplus? I thought of something like this: > > SALE: > "Asset:Bank Account" increase +2000 > "Asset:Musical Instrument Collection" decrease -1000 > "Income:Musical Instrument Sales" increase +1000 > > If the above is correct and feasible, how would I enter it in GC? > > F. > > https://www.instagram.com/boniforti_music > https://soundcloud.com/boniforti_music > https://bonny-j.bandcamp.com > > > Am Di., 24. Sept. 2024 um 06:48 Uhr schrieb David Cousens < > davidcousen...@gmail.com>: > > > Flavio, > > > > If you were just buying musical instruments with no intention of earning > > income with them or in the future, you would simply record the purchase > > transaction as > > > > Asset :Bank account credit xxx > > Expenses: Musical Instruments debit xxx > > > > and any subsequent sale is > > > > Asset:bank debit yyy > > Income:Musical Instrument Sales credit yyy > > > > and you may or may not be required to pay tax on that income depending on > > your jurisdictions tax rules (in most cases probably not if below some > > legislated threshold for business activity), and that would be the end of > > it. In most jurisdictions you will also likely be below the threshold > > where any such activities are treated on a cash accounting basis, i.e. > they > > are recorded at the point where the money changes hands. > > > > When you purchase instruments where the intention is to either resell > them > > or otherwise use them to generate income usually on some form of fairly > > regular basis, then when they are purchased, they are an asset to your > > enterprise, whether that is simply personal or a business, so the > purchase > > becomes an asset rather than an expense. For business usually where > > turnover is above a specified threshold set by taxation legislation, you > > will be required to record transactions on an accrual timing basis and > for > > purchases, this is generally at the time when the agreement to make a > > specific purchase is entered into, not when the actual; cash changes > > hands. Similarly on sales, when you agree to sell an item, the receipt > of > > income is recorded at the time you agree to do so not necessarily when > you > > actually receive the funds. > > > > There is another accounting principle which requires that the recording > of > > expense of items sold should be matched in timing to the recording of the > > income. recording purchases as an asset class inventory meets the first > > requirement and recording it as an expense against the Cost of Goods Sold > > at the timing of the sale meets the second. The Cost of Goods Sold title > > just arises because most businesses will sell many different types of > > items. If the expense were recorded at the time of purchase, then the > > calculation of profit is thrown out of whack and if you do that your > > taxation authorities tend to start accusing you of trying to avoid tax. > > Such Inventory and CoGS accounts can have subaccounts for specific items > > or classes of items where knowing that information is material to the > > management of the business. There are also sales taxes, VAT, GST type > > taxes to deal with as well in some jurisdictions. > > > > On Mon, 2024-09-23 at 17:26 +0200, Boniforti Flavio wrote: > > > > Hi David. > > Thanks for correcting me. > > I have a few more questions: > > > > As of today, I've got "Assets:Current Assets:Music Equipment CHF" and > > "Assets:Current Assets:Music Equipment EUR" which I consider my inventory > > accounts. There I entered the price of a musical instrument which I > bought. > > I also do have the account "Income:Music Equipment Sales CHF" and > > "Income:Music Equipment Sales EUR". > > > > I'm not understanding the use of the "Expenses:Cost of goods sold" > account > > - can you explain? > > > > Thanks, > > Flavio. > > > > https://www.instagram.com/boniforti_music > > https://soundcloud.com/boniforti_music > > https://bonny-j.bandcamp.com > > > > > > Am Fr., 20. Sept. 2024 um 00:58 Uhr schrieb David Cousens < > > davidcousen...@gmail.com>: > > > > Flavio, > > > > > I would do the following when selling something for 120 which I bought > > for 100: > > > 1. increase the checking account by 120; > > > 2. increase the "Income:Sales" account by 120; > > > 3. increase the "Inventory:Music Equipment Sales" account by 120; > > > 4. decrease the "Expenses:Cost of Goods Sold" account by 100. > > > > These steps are not correct . Your inventory account records the value > (at > > cost) of the items you are holding so the entry on sale o an item should > > equal the cost at purchaser so you your transaction to record it should > be: > > > > 1 . increase (debit) the checking account by 120 > > 2. increase (credit) the Income:Sales account by 120 > > 3. decrease (credit) the Inventory:Music Equipment Sales account by 100 > > 4. increase (debit) the Expenses: Cost of Goods Sold account by 100 > > > > > > The Inventory:Music Equipment Sales account is what is known in > > accounting terms as a contra account to the Music Equipment Purchases > > which is why it is credited to decrease the balance of Inventory (rather > > than debit as is usual to increase the balance of an asset account). I > > have added the usual accounting column headings in brackets. Of the two > > columns with entries in themthe Debit column is always the first and the > > Credit column is always the second followed by the Balance colum last. > > > > Note that in any transaction the sums of all the debit and all the > credit > > entries have to be equal, which was not the case for your proposed > entries. > > > > Cheers > > David > > > > > > On Thu, 2024-09-19 at 21:52 +0200, Boniforti Flavio wrote: > > > > Hi David and David :-) > > Thanks for your replies. > > I'm not running any business at all. I am a musician who also collects > > (vintage) music instruments. As I also do play them, it happens a couple > of > > times a year that I'm not interested anymore in keeping one or the other > > instrument. For this reason, I sell a couple of items a year and given > the > > fact that the majority of my items are "vintage" ones, prices are always > > fluctuating. So I want to keep track of how much I've gained (or lost) > when > > selling an item. > > Given the above, I think that if I would only use a single "Music > > equipment" account, I could not see how much I made (plus or minus) while > > selling some items - right? This is the reason which led me to think > > about setting up some accounts to "correctly" keep track of this all. > > > > Using this: > > 1. Debit the Checking account for the total amount of the purchase paid > by > > the customer; > > 2. Credit the Income:Sales account by the total amount of the purchase; > > 3. Credit the Inventory: MusicEquipment Sales account by the amount of > the > > cost of the items sold; > > 4. Debit the Expenses:Cost of Goods Sold account by the amount of the > > cost of the items sold. > > > > I would do the following when selling something for 120 which I bought > for > > 100: > > 1. increase the checking account by 120; > > 2. increase the "Income:Sales" account by 120; > > 3. increase the "Inventory:Music Equipment Sales" account by 120; > > 4. decrease the "Expenses:Cost of Goods Sold" account by 100. > > > > (of course previoulsy I'd had increased the "Inventory:Music Equipment > > Purchases" and decreased my "Assets:Checking Account" by 100). > > > > Am I correct with the above? > > TIA, > > F. > > > > > > https://www.instagram.com/boniforti_music > > https://soundcloud.com/boniforti_music > > https://bonny-j.bandcamp.com > > > > > > Am Do., 19. Sept. 2024 um 03:52 Uhr schrieb David Cousens < > > davidcousen...@gmail.com>: > > > > Flavio, > > > > Why would you need a Music equipment sold account in the first place? > > > > If your business is making music then: > > > > when you buy equipment you credit your checking account and debit the > > Music Equipment asset account by the amount of the purchase; > > when you sell the equipment you debit your checking account and credit > > the music equipment account. > > > > In this case the equipment is not held for the purpose of selling it at > > a profit. You may however be subject to capital gains type taxes if > > they apply in your jurisdiction and the value of the equipment sold > > exceeds the thresholds for such taxes. > > > > The situation may however be slightly different if your business is > > actually retailing music equipment. In this case the Music Equipment > > account is essentially an Inventory account - still an asset account. > > > > You would normally in these circumstances set up an Inventory asset > > account which is a placeholder with two sub accounts Inventory:Music > > Equipment Purchases and Inventory:Music Equipment Sales. Your Income > > top level account will also need a subaccount Income:Sales and your > > Expenses top level acoount will need a sub account Expenses:Cost of > > Goods Sold (GoGS) > > > > The basic procedure is the same for purchases of equipment, credit the > > checking account and debit the Music Equipment Purchases sub account. > > > > When you make a sale only the difference between the cost of the > > equipment sold and the selling price is your income ( neglecting any > > sales tax issues which may also apply) so the following will be the > > basic procedure: > > > > Debit the Checking account for the total amount of the purchase paid by > > the customer; > > Credit the Income:Sales account by the total amount of the purchase; > > Credit the Inventory: MusicEquipment Sales account by the amount of the > > cost of the items sold; > > Debit the Expenses:Cost of Goods Sold account by the amount of the > > cosdt of the items sold. > > > > Your profit on the transaction is recorde by the difference between the > > Income:Sales account and the Expenses:Cost of Goods Sold account > > entries. > > > > Dealing with any applicable taxes will add additional steps to the > > accounting as will making allowances returns of purchases to > > suppliersof faulty equipment and returns of equipment to you with > > faults by customers. You should consult an accountant and consumer > > legislation in your jurisdiction in how to deal with these. > > > > David Cousens > > > > On Wed, 2024-09-18 at 23:37 +0200, Boniforti Flavio wrote: > > > Hi. > > > Still very noob here, so bear with me please. > > > > > > I've got the following accounts (among others): > > > > > > Music equipment > > > Music equipment sold > > > Checking account > > > > > > When I buy music equipment, I take the money from my checking account > > > and > > > add it to the "music equipment" account. > > > When I sell music equipment, how should I register it? I thought that > > > the > > > account "music equipment" would decrease by the sold value, the > > > checking > > > account would increase by the same amount... but what happens with > > > the > > > "Music equipment sold" account? > > > Or am I wrong in separating "music equipment" from "music equipment > > > sold"? > > > > > > Thanks, > > > F. > > > > > > https://www.instagram.com/boniforti_music > > > https://soundcloud.com/boniforti_music > > > https://bonny-j.bandcamp.com > > > _______________________________________________ > > > gnucash-user mailing list > > > gnucash-user@gnucash.org > > > To update your subscription preferences or to unsubscribe: > > > https://lists.gnucash.org/mailman/listinfo/gnucash-user > > > ----- > > > 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 > > gnucash-user@gnucash.org > > To update your subscription preferences or to unsubscribe: > > https://lists.gnucash.org/mailman/listinfo/gnucash-user > > ----- > > 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 > gnucash-user@gnucash.org > To update your subscription preferences or to unsubscribe: > https://lists.gnucash.org/mailman/listinfo/gnucash-user > ----- > 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 gnucash-user@gnucash.org To update your subscription preferences or to unsubscribe: https://lists.gnucash.org/mailman/listinfo/gnucash-user ----- Please remember to CC this list on all your replies. 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