[GNC] How to Reclassify Invoice Amounts

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[GNC] How to Reclassify Invoice Amounts

tbalaban
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Re: [GNC] How to Reclassify Invoice Amounts

Adrien Monteleone-2
You should really speak to a local CPA to get a clear direction and picture of how you need to handle the various issues particular to your jurisdiction.

Revenue and expenses should not be in the same transaction and expenses should certainly not be on an invoice except in rare cases where you pass them on directly with the customer’s knowledge that you do so. (freight and other logistical expenses are sometimes directly invoiced)

The revenue sharing would likely be handled as a pass-through similar to sales taxes. You’ll book a transaction to something like a ‘revenue sharing due’ liability account. But unlike sales taxes, it should be handled separately and should not appear on the invoice. It might instead be handled like a dividend payment.

PayPal is just an expense. You can book it each time, or from a monthly statement similar to how you would record merchant fees for credit card receipts.

The insurance amount is an expense and should be booked when you ‘use’ it. Many insurances are usually pre-paid, booked as assets and then expensed when they are ‘used’. Adjust for your case as needed.

The remainder is just left over after everything else. You generally don’t record it separately. (unless you book Retained Earnings periodically) You discover what it is via an Income Statement. (P&L report)


Your invoice should result in:

Dr. Assets:Current Assets:Accounts Receivable $225.65
Cr. Revenue:Sales $225.65


The receipt of payment would be:

Dr. Assets:Current Assets:Checking $225.65
Cr. Assets:Current Assets:Accounts Receivable $225.65


Then you’ll create something similar to each of the following:

Dr. Expenses:Bank Fees $3.90
Cr. Assets:Current Assets:Checking $3.90

Dr. Expenses:Insurance $192.15
Cr. Assets:Current Assets:Checking $192.15

or

Dr. Expenses:Insurance $192.15
Cr. Assets:Current Assets:Pre-paid:Insurance $192.15

Dr. Revenue:Sales $13.73
Cr. Liabilities:Revenue-Sharing Due $13.73

When you actually pay your revenue-sharing partner:

Dr. Liabilities:Revenue-Sharing Due
Cr. Assets:Current Assets:Checking

Regards,
Adrien

> On Dec 8, 2018, at 10:40 AM, tbalaban <[hidden email]> wrote:
>
> I run a service organization that contracts with others on per item basis.
> Therefore the amount I invoice is much greater than the amount we retain.
>
> How do I reclassify the amount invoiced so that the various expenses related
> to the transaction are booked but not shown on the invoice?
>
> E.G., a service fee is $3.65 for 61 units or $225.65. Of this 1.75% may go
> to PayPal, $192.15 will go to our insurance company, 13.73 will go to a
> revenue-sharing partner leaving $15.82.
>
> Before I started keeping track of sales by invoice I would just splt the
> transaction. Bow that I'm using the A/R part of the system, can I do the
> same thing but have the customer only see the amount due and not the
> underlying splits?
>
> Many thanks for any guidance you can provide.
>
>
>
> --
> Sent from: http://gnucash.1415818.n4.nabble.com/GnuCash-User-f1415819.html
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Re: [GNC] How to Reclassify Invoice Amounts

Diane Trefethen-2
In reply to this post by tbalaban
Unless I misunderstand your situation, you are a small business, do
things pretty simply, and do not have a large accounting dept. If this
is so, then you don’t need to reclassify anything. The total billed for
your service(s) is Sales and all the “various expenses related to the
transaction” are booked as expenses when you enter the bills from YOUR
vendor(s), if you are on the accrual basis, or when you pay your bills,
if you are on the cash basis. [Side note: One thing you said worries me.
“Before I started keeping track of sales by invoice I would just splt
the transaction.” IF you “split the transaction” by breaking the invoice
total down into income, fees, shipping, etc, what did you book when you
paid your bills for those items? Take PayPal. If you used to book $1.75
of the invoice as PayPal Expenses AND you booked your bills from PayPal
as PayPal Expenses, then you booked each PayPal fee twice. This would
badly distort your P&L statement because you would be showing less
revenue than you were actually receiving and more expenditures than you
actually incurred.]

Be forewarned that Adrien’s additional GL posts like
Dr. Expenses:Insurance                          $192.15
Cr. Assets:Current Assets:Checking                      $192.15
are a mistake if you book insurance, PayPal, and other expenses when you
enter or pay the bills for those items. Doing it a second time will a)
throw your checking account out of balance and b) double book your
expenses which the IRS will NOT be happy about.

There is a misconception that accounting programs can do everything.
They can’t. There are many things that are better tracked separately
using spreadsheets and then booked into the accounting program with
end-of-month GL entries, like pre-paid insurance and accrued interest,
for example.
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Re: [GNC] How to Reclassify Invoice Amounts

Adrien Monteleone-2
In reply to this post by Adrien Monteleone-2
Tom,

When you record the payment of the invoice, record the full amount.

Then either

make a separate expense transaction for the fee balanced against your PayPal account/checking account. (depending on if you use the PayPal account and then transfer afterwards)

or

edit the payment transaction (from the account register in went into - NOT from the A/R register) to reduce the amount actually received, GnuCash will calculate an Imbalance split line and you can just change the account on this new split to the Bank Fees expense account. Do not change the A/R split.

(Don’t forget to copy the list on all replies so others can benefit from the exchange.)

Regards,
Adrien

> On Dec 8, 2018, at 1:18 PM, Tom Balaban <[hidden email]> wrote:
>
> Many thanks, Adrien.
>
> You have confirmed what I was thinking I had to do.
>
> The remaining issue I'll have to deal with is PayPal. They automatically withhold their service fee so we never see the full payment. Their statement for reconciliation is net amount.
>
> Tom
>
> On December 8, 2018 1:48:09 PM Adrien Monteleone <[hidden email]> wrote:
>
>> You should really speak to a local CPA to get a clear direction and picture of how you need to handle the various issues particular to your jurisdiction.
>>
>> Revenue and expenses should not be in the same transaction and expenses should certainly not be on an invoice except in rare cases where you pass them on directly with the customer’s knowledge that you do so. (freight and other logistical expenses are sometimes directly invoiced)
>>
>> The revenue sharing would likely be handled as a pass-through similar to sales taxes. You’ll book a transaction to something like a ‘revenue sharing due’ liability account. But unlike sales taxes, it should be handled separately and should not appear on the invoice. It might instead be handled like a dividend payment.
>>
>> PayPal is just an expense. You can book it each time, or from a monthly statement similar to how you would record merchant fees for credit card receipts.
>>
>> The insurance amount is an expense and should be booked when you ‘use’ it. Many insurances are usually pre-paid, booked as assets and then expensed when they are ‘used’. Adjust for your case as needed.
>>
>> The remainder is just left over after everything else. You generally don’t record it separately. (unless you book Retained Earnings periodically) You discover what it is via an Income Statement. (P&L report)
>>
>>
>> Your invoice should result in:
>>
>> Dr. Assets:Current Assets:Accounts Receivable $225.65
>> Cr. Revenue:Sales $225.65
>>
>>
>> The receipt of payment would be:
>>
>> Dr. Assets:Current Assets:Checking $225.65
>> Cr. Assets:Current Assets:Accounts Receivable $225.65
>>
>>
>> Then you’ll create something similar to each of the following:
>>
>> Dr. Expenses:Bank Fees $3.90
>> Cr. Assets:Current Assets:Checking $3.90
>>
>> Dr. Expenses:Insurance $192.15
>> Cr. Assets:Current Assets:Checking $192.15
>>
>> or
>>
>> Dr. Expenses:Insurance $192.15
>> Cr. Assets:Current Assets:Pre-paid:Insurance $192.15
>>
>> Dr. Revenue:Sales $13.73
>> Cr. Liabilities:Revenue-Sharing Due $13.73
>>
>> When you actually pay your revenue-sharing partner:
>>
>> Dr. Liabilities:Revenue-Sharing Due
>> Cr. Assets:Current Assets:Checking
>>
>> Regards,
>> Adrien
>>
>>> On Dec 8, 2018, at 10:40 AM, tbalaban <[hidden email]> wrote:
>>>
>>> I run a service organization that contracts with others on per item basis.
>>> Therefore the amount I invoice is much greater than the amount we retain.
>>>
>>> How do I reclassify the amount invoiced so that the various expenses related
>>> to the transaction are booked but not shown on the invoice?
>>>
>>> E.G., a service fee is $3.65 for 61 units or $225.65. Of this 1.75% may go
>>> to PayPal, $192.15 will go to our insurance company, 13.73 will go to a
>>> revenue-sharing partner leaving $15.82.
>>>
>>> Before I started keeping track of sales by invoice I would just splt the
>>> transaction. Bow that I'm using the A/R part of the system, can I do the
>>> same thing but have the customer only see the amount due and not the
>>> underlying splits?
>>>
>>> Many thanks for any guidance you can provide.
>>>
>>>
>>>
>>> --
>>> Sent from: http://gnucash.1415818.n4.nabble.com/GnuCash-User-f1415819.html
>>> _______________________________________________
>>> gnucash-user mailing list
>>> [hidden email]
>>> To update your subscription preferences or to unsubscribe:
>>> https://lists.gnucash.org/mailman/listinfo/gnucash-user
>>> If you are using Nabble or Gmane, please see https://wiki.gnucash.org/wiki/Mailing_Lists for more information.
>>> -----
>>> 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
>> [hidden email]
>> To update your subscription preferences or to unsubscribe:
>> https://lists.gnucash.org/mailman/listinfo/gnucash-user
>> If you are using Nabble or Gmane, please see https://wiki.gnucash.org/wiki/Mailing_Lists for more information.
>> -----
>> 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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Re: [GNC] How to Reclassify Invoice Amounts

tbalaban
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Re: [GNC] How to Reclassify Invoice Amounts

tbalaban
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Re: [GNC] How to Reclassify Invoice Amounts

Derek Atkins
In reply to this post by tbalaban
Hi,

tbalaban <[hidden email]> writes:

> I run a service organization that contracts with others on per item basis.
> Therefore the amount I invoice is much greater than the amount we retain.
>
> How do I reclassify the amount invoiced so that the various expenses related
> to the transaction are booked but not shown on the invoice?
>
> E.G., a service fee is $3.65 for 61 units or $225.65. Of this 1.75% may go
> to PayPal, $192.15 will go to our insurance company, 13.73 will go to a
> revenue-sharing partner leaving $15.82.
>
> Before I started keeping track of sales by invoice I would just splt the
> transaction. Bow that I'm using the A/R part of the system, can I do the
> same thing but have the customer only see the amount due and not the
> underlying splits?
>
> Many thanks for any guidance you can provide.

Have you considered using the Tax Tables to automatically split this out
for you?  Of course, this assumes that the split percentages are fixed.

> Please remember to CC this list on all your replies.
> You can do this by using Reply-To-List or Reply-All.

-derek

--
       Derek Atkins, SB '93 MIT EE, SM '95 MIT Media Laboratory
       Member, MIT Student Information Processing Board  (SIPB)
       URL: http://web.mit.edu/warlord/    PP-ASEL-IA     N1NWH
       [hidden email]                        PGP key available
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Re: [GNC] How to Reclassify Invoice Amounts

tbalaban
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