How to enter drawings?

Hello,

My manager bought Bananas for me …how can I post the drawing?
Thank you.

It is not clear what you are asking. If you want to attach a drawing of bananas to a transaction form, see https://www.manager.io/guides/9817.

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To me this sounds as if the manager bought food inventory for the business with their own money and needs to be reimbursed (“drawing” meaning to draw funds, perhaps).

@Suraj239, you can use the Expense Claims function, detailed here https://www.manager.io/guides/6898 if that is the case.

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@p4unger, you may be on the correct path. But of course, if someone bought inventory with personal funds, that is not a capital drawing, it would be equivalent to a capital contribution. Nevertheless, an expense claim would be the correct way to enter the transaction. If the manager is reimbursed, that would be a capital draw (assuming the equity structure includes capital accounts).

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This might help.

https://www.manager.io/guides/6971

If your manager is also the owner or a partner of the business and is allowed to draw funds from the capital account, then you should use Payment. Select the Capital Account >> Specific Capital >> Drawings

Use the same amount as that of the items bought.

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Thank you all @p4unger @Tut @marofrancia

Sorry for not being clear. Actually I own a restaurant and My manager is an employee who also does purchase of inventory items for the business, but he sometimes buys goods for my personal use using company fund, so my question was what should I do when he buys Banana for my personal use?
Is it ok if I don’t bother with whatever he buys for me and simply post the transaction as payment to drawings? The only flaw will be that later on I will not know that whether I had withdrawn cash or had my manager bought something for me.

I would also like to take this opportunity to ask that what if my family member comes and take some food from the restaurant and I would like to post it as drawing instead of paying cash?How can I post the transaction?

thank you.

Yes. The transaction is as though you withdrew the money and made the purchase yourself. Do not enter the bananas as an inventory item on the payment form, however. That would raise your quantity on hand. Select the fruit merchant as the payee and post the banana line item to your drawings subaccount of your capital account. You can describe the bananas purchase in the line item description.

When your family member takes food, the transaction depends on whether the food is in inventory:

  • If the food is in inventory, use an inventory write-off. Post it to your drawings subaccount.
  • If the food is not an inventory item (was purchased as a consumable item), use a journal entry. Debit your drawings subaccount and credit the expense account where the expense was originally recorded.
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Thank you @Tut
First part is clear but for the second part I am using Inventory kit as saleable items so I will not be able to write off them as inventory…I think what I can do is pay business first and then withdraw the equivalent amount as I do in the previous case.

Thank you.

You can enter a write-off for the components of an inventory kit.

This would not be correct. If you pay the business for the food your family member takes, it is recorded completely already through a receipt, just as though some other customer purchased it. Inventory will be reduced but you must independently determine a price to charge. That price should match your cost or you will distort your profitability. If you also take a drawing, you are withdrawing capital. As the owner, you can withdraw capital any time you want (assuming you have a positive capital account balance). But doing both just makes unnecessary work. And the two transactions would actually be unrelated.

Separate in your mind the fact that the food is normally sold as an inventory kit from your family member taking it. Inventory kits are just shortcuts for selling inventory items together. The kits do not exist separately in your inventory. When a family member takes food, you have a non-revenue reduction of the inventory items in the kit. So an inventory write-off is the way to enter this. You will list all the components, and post the write-off to your drawings subacccount. That way, the cost is transferred out of Inventory on hand at the current average cost rather than some invented price. The effective reduction of your investment in the business comes out of your capital account. And there is only one transaction.

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Thank you @Tut
but how will I calculate the components of inventory kit? Isn’t that a hectic task? Is there an easy way for doing so?
In stead what I had thought was, I will not actually pay cash to the business but I will just create the receipt and withdraw from the same cash account. Apologies if that sounds like a moron.
Thank you.

Since you run a restaurant, what I suggest you do are the following:

  1. Enable Production Orders (if not yet active)
  2. Make a list of all the ingredients that normally goes into a certain menu item including their measurements in order to make a single serving or order.
  3. Create an Inventory Item for the each finished menu, let’s say, Spicy Buttered Garlic Shrimp (my personal favorite)
  4. Create a production order based on the number of servings that your kitchen produces. This way, your ingredients will be decreased relative to the amount of finished servings you cooked. This will allow you to track the movement of your ingredients in relation to the number of finished menu items you produce, you will also be able to identify if your losing money on food wastes as you reconcile your inventory prior to making some runs to the market to purchase new ones.
  5. On the note that you wanted to make whatever your family takes as a form of withdrawal from your business, you can now just simply use a Journal Entry.

Debit your Capital Account >> Your Capital >> Drawings
and credit Inventory on Hand >> Menu Item

Steps 1 through 4 is how one of my clients manage their kitchen to ensure that staff members don’t waste too much ingredients in cooking. I hope this works well for you too.

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For what you want to do, you don’t have to make any calculations. You only need to know the components of the inventory kit.

@marofrancia has discussed making finished inventory items out of components, so I will not repeat that. But suppose you want to keep to the inventory kit idea. You have an inventory kit, Flat Bread with Hummus. It is composed of 2 pieces of Flat Bread and 100 grams of Hummus, both of which are inventory items.

When your family member takes an order of Flat Bread with Hummus, you enter a write-off for 2 pieces of Flat Bread and 100 grams of Hummus. These items are removed from inventory at their current average cost, which you do not need to know. Their cost will be deducted from your drawings subaccount in your capital account. So you no longer have quite so much money invested in the business. You have taken a small portion out in the form of Flat Bread and Hummus.

What if you follow the approach you suggested of creating a receipt and withdrawing money from the cash account? First, you have to determine the price for the receipt. You could use the retail price you charge other customers for Flat Break with Hummus. But when you withdraw the same amount of money and post the withdrawal to your drawings subaccount, you will be taking out more than your real cost. So your capital account will be reduced by more than it really was. In other words, your capital account will show you have less invested in the business than you really do. That will be especially bad if you have any partners.

You could also look up the current average cost of the inventory kit components and enter the receipt and withdrawal at those costs. This would be financially correct. But you would have to look up the costs and enter two transactions to accomplish the same thing as one inventory write-off with no lookup work. The result will be the same. But personally, I would choose to take the approach with less work.

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Thank you @marofrancia
Much appreciate the elaborated explanation, but I am using inventory kit for the purpose, inventory kit is not meant for the same though. I don’t think creating production order every day will be possible. @Tut Actually by consuming finished goods, I am also consuming labor along with the inventory items, so I think I should also take labor charge for the production into consideration while calculating the amount of withdrawal, so I still think that withdrawing the amount equivalent to the invoice total would be more true and fair. Do you see any other flaw in using inventory kit for tracking the use of raw materials by the kitchen?

Thank you.

@Tut This would be my preferred method for dealing with this kind of transaction, but I don’t see the option to post to the drawings subaccount for the allocation. Do I need to restructure my chart of accounts, or am I missing something?

@Suraj239, you cannot include non-inventory costs in a write-off, only the acquisition cost. If you want to include non-inventory costs, you will have to use production orders to create new finished items, then write those off. I admit that makes a lot of work.

That takes us back to your idea of just buying the food. You can certainly do that. It is a clean, simple transaction. The problem will arise if you then take the money back out as a drawing. You will have contributed to your own profit, which might increase income taxes for the business. Then, you will pay yourself the money through the drawing, which might increase your personal income taxes. You should discuss the tax consequences with an accountant.

It is difficult to predict what problems could arise when you use a feature of the program for a completely different purpose than it was intended. But in general, you would be using a tool meant to bundle finished goods to track non-revenue reduction of raw materials. It seems clumsy and prone to error.

You are right. My mistake for not verifying that. So this would have to be done through a clearing account. The overall situation clearly does not represent income or expense, so I would set up the clearing account in the Equity section of the chart of accounts. Then use a journal entry to clear the transaction to drawings. Depending on how often these events occurred, you could do that at any desired frequency.

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Thanks for that suggestion. I had been using journal entries until now, but your method avoids having to check and enter the costs, which would be helpful and less prone to error.

Do you think being able to post directly from the inventory write-off to the drawings account is a feature request that should be classified as an idea? Or is there a good reason it’s not available? I would find it useful.

If you write up the suggestion with a justification, I will put it into ideas.

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Thanks, I’ll do that.