Re: Ledger-smb-users Digest, Vol 18, Issue 8

["David Tangye" <..hidden..>]

To add to this: you should see that you have two transactions, not one: a purchase and a sale. Each balances. The difference is your profit.

You do not add a transaction for your profit. A report shows it, as the difference in Income/Revenue minus Expenses for a period. (Income/Revenue = equivalent terms: some countries tend to use one term, some the other.)

I highly recommend anyone that is a bit hazy with accounting to read all the lessons of The Beancounter Tutorial, carefully. You will then clearly understand stuff, like the fact that transactions in Income/Revenue and Expenses accounts are just subaccounts for holding this year's Equity/Capital (Accumulated Profit/Loss) items ("Ma Capital's Kids"). I wish I had read the Beancounter Tutorial 30 years ago.

On Feb 8, 2008 12:45 PM, Trevor J. Christensen <..hidden..> wrote:

To answer your very first question/email.......Certainly.  If you only intend on entering transactions via the GL, you need only create the two accounts via SYSTEM -> CHART OF ACCOUNTS.  I find it easiest to edit an existing account (i.e. change the number from 4000 to 4001 and 'save as new'.  Now you have both accounts 4000 and 4001.  If you find you want to enter transactions via the AR or AP functionality, you may need/want to adjust the check boxes (in the account display) to determine where/when and in what menu the accounts show up.  I hope this helps.

To answer your next question.....yes the difference (i.e. sales less cost) must be accounted for.  Here is a typical entry

Account |  Debit  |  Credit  |  Notes
=========================================================
CASH       500                  Post sale of bread (or if on account post to AR)
SALES                 500      
COGS       400                  Post cost of bread sold (or if on account post to AP)
CASH                  400      

The difference (your profit margin will show up in your income statement (until you close it out for year end).

Trevor