Hi David W. (I have to start adding the initial as to differentiate between the two Davids who are replying and helping me here!) ;-)
So it's a matter of split-transactions to be entered correctly, right? Let me see if I did it correctly with a test. On 24.09.2024 I bought "TEST ONE" for 1000: [image: image.png] I then sell it tomorrow 25.09.2024 for 2000: [image: image.png] (the above screenshots are from the "Asset:Checking Account"). Thanks for your help, F. https://www.instagram.com/boniforti_music https://soundcloud.com/boniforti_music https://bonny-j.bandcamp.com Am Di., 24. Sept. 2024 um 22:43 Uhr schrieb David Warren <da...@warren1.net >: > 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. >> >
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