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Join nowWe'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
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
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
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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