what exactly am I selling, and how to I account for it?

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Chris Ryan

Nov 26, 2023, 11:24:26 PM11/26/23
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I'm continuing to think (perhaps overthink) about income.

If I manufactured and sold widgets, I'd have an inventory of them, worth W dollars. An Asset, right? Then if I sold S dollars worth to a customer, I'd have to account for a decrease in value of Inventory, and an increase in value of, what, Income:sales? And then how to track that money to my bank into Assets:checking?

2024-01-02 My first sale of widgets, to the Acme company
Inventory - S
Income:sales S
Income:sales -S
Assets:checking: S

Is that anywhere close to correct?

But here's the rub: I don't produce and sell widgets. As a statistical consultant, I sell effort, time, expertise. Let's just call it "Effort". Do I need an account called "Effort", from which I subtract and then add to Income:consulting? Trading one for the other so to speak?


Chris Ryan

Brandon Olivares

Nov 26, 2023, 11:48:18 PM11/26/23
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When you have inventory, it’d go something like this:

2023-01-01 Buying inventory
Assets:Inventory 20 widgets @ $50.00
Assets:Checking $-1,000.00

2023-01-15 Selling widgets for $100 each
Assets:Inventory -5 widgets @ $50.00
Expenses:COGS $250.00
Income:Sales $-500.00
Assets:Checking $500.00

Since you are selling a service, not inventory, you wouldn’t do any of that. You would just have your services going to Income:Consulting or whatever category.

There are some special circumstances you may want to consider, such as if you receive a deposit that you haven’t earned yet, then that goes into deferred revenue, a liability, but that’s a bit more of a complicated topic.
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