Some Basic Accounting Questions From A Newbie...HELP!!

[vintageshavingshoppe]

I would be very grateful if someone knowledgeable could answer the following questions. I just purchased Quickbooks 2011 and I want to set up my books right the first time.

My business does two main things:

• It buys antiques, sometimes individually and sometimes in lots of more than one at a time. If I, for example, buy a box of coins, I am not going to sell the coins in the same format (i.e. "the box") in which I bought them.
  
• We bottle our own line of sharpening fluids. This means that I but the components (the fluid, bottles and labels) and sell the finished product.

The business is an LLC with an S-Corp election.

Based on this information, I have several basic accounting questions. Please be gentle...I know nothing about double entry accounting:

• When I buy merchandise to resell, into what account do I put the money I spent on the items?
  
• How do I "inventory" items that I buy in a "box" yet sell individually? Keep in mind that I usually do not know how the final sale will be "packaged" until it is made.
  
• When I put money (cash) into the business for operating costs, what account should it go into?
  
• When I purchase the components of the products that I bottle (fluids, bottles, labels) what account does the purchase cost of each component go into?
  
• Does the finished product then become an inventory item? If so, how do I account for and value it?
  
• When I take money out of the corporation to pay personal bills, how do I account for that?

Thank you in advance for taking the time to answer my questions. I hope the answers are basic enough to inform others in my situation.

John

 

[danielk3066]

hi their wow u werent kidding u got yr self a challenge friend.
yr list of things u r unsure about will keep changing month by month im guessing.
you also need to do things right first time.
you really do did to buy some books on bookkeeping my freind.
you should have or set up a nominal ledge if u dont know what this is then google it, it will answer all yr questions above along with the use of a basic bookkeeping book.

 

[Ivy Mike]

"When I buy merchandise to resell, into what account do I put the money I spent on the items?"

These should be inventory "items", as QuickBooks terminology goes

"How do I "inventory" items that I buy in a "box" yet sell individually? Keep in mind that I usually do not know how the final sale will be "packaged" until it is made."

This depends on how you manage your inventory. Technically, regardless of how frequently you do a physical count, you should track individual items sold. QuickBooks will keep track on inventory and you are able to run reports to see what you have in inventory and what to re-order.

With regards to the cost of the items you sell (in calculating profit: Sales Price - Cost of Goods Sold [COGS]), you may need a more advanced tracking system if the prices of your inventory are changing.

"When I put money (cash) into the business for operating costs, what account should it go into?"

Owner's equity

"When I purchase the components of the products that I bottle (fluids, bottles, labels) what account does the purchase cost of each component go into?"

These are components of "manufacturing" a product, so they should be accounted for as raw materials. These will be accounted for in a similar way to inventory.

"Does the finished product then become an inventory item? If so, how do I account for and value it?"

The value of the item is the cost(s) to manufacture it.

"When I take money out of the corporation to pay personal bills, how do I account for that?"

This would either come from payroll (paycheck to the owner) or a decrease to owner's equity. Regardless of the form of business, but especially in a corporation, personal expenses unrelated to the business must be kept completely separate.

Good luck.

P.S. You may want to invest a few hundred bucks into some training. I used realworldtraining. Not to advertise for them or anything, but I feel like they do a good job.