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Level 1

How to record a loss for a farmer's market

We're a non-profit that runs several farmers markets and I need to know how to record a loss.

 

Here's the scenario:  It's an online market, customers place orders online Friday - Sunday then pick their orders up Tuesday.  Sunday evening our farmers get a notice of what has been ordered from them, they pack everything up and bring it to the customer pickup location.

 

How do I record a loss that is our fault?  For instance, a watermelon rolls off the table and breaks; this is not the farmer's fault nor the customers fault.  How do I record the loss of the watermelon?

 

Should I create Journal Entries?  I would debit a Loss account, but what account do I credit? Or is there a better way to do this?

 

TIA,

Leslie

 

3 Comments
Highlighted
Level 15

How to record a loss for a farmer's market

wish you had explained the pay arrangements

assuming the farmer gets $2 a watermelon, and the customer pays $3 each

you get 5 watermelons from the farmer, so you owe him $10
one breaks
customers buy 4, you make $12 in sales

 

the P&L for only this would be
income
>> watermelon sales $12

 

expense
>> watermelon $10

 

net profit $2

the cost is built in, it never sold, but you still had to pay for it, so there is nothing extra to enter

Highlighted
Level 1

How to record a loss for a farmer's market

Thanks @Rustler for responding!

 

The farmer posts online watermelons for $3; the customer purchases the watermelon for $3; we pay the farmer $2.70 and keep 10% for our operating costs.

 

We've lost that $2.70!

 

While $2.70 could easily be absorbed in the profits of whole market, it's not always this black & white.  I really need to know how to record it as a loss.

 

Leslie

Highlighted
Level 15

How to record a loss for a farmer's market

Business accounts for the overall, income less expenses is net profit.  Higher expense given the same income, lower net profit - which reflects that loss you are thinking of

 

and as a side note, that 10% you say you keep for operating costs, is income, not sure from what you say whether or not you are treating it that way.

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