Comment by omichowdhury
2 years ago
I guess technically this would be selling a service instead of a good.
I was going through the 4 combinations of balanced two-line entries, based on the accounting equation, to show how it helps when thinking through how to record something.
If you get into more than two lines, then yup selling a good would be
+Asset -Asset +Income
or if you include sales tax and son shipping costs:
+Asset -Asset +Liability +Income +Expense
Using an updated accounting equation and negative numbers is a lot more intuitive than credits and debits. In this larger example it tells you:
Cash Asset - COGS Asset - Tax Liability = Sales Income - Shipping Expense
It tells you what types of accounts balance, with a syntax that matches your intuitions: more asset = good, less asset = bad, more expense = bad, less expense = good.
> I guess technically this would be selling a service instead of a good.
LAAS!
Sorry, no, lemonade is not a service. It is true that you are adding value by turning lemons into lemonade, but that's not what you're selling. You're selling the lemonade. LAAS would be turning someone else's lemons into lemonade for them, but a typical lemonade manufacturer owns their raw materials.
I completely forgot what the original post I was replying to was about lol. If it was about lemonade then yup the lemons and the lemonade should be on the books as assets.
I’ve also wondered what to do if you grow your own lemons. I guess you could offset the new asset on your books with a Harvest income account?
One of our customers built an ERP for food distributors, I should ask them how they would handle it.