Accounting?

Interesting since all the dealers I've ever known do not keep such detailed records. Or at least that they mention. At all the coin shows I've ever gone to I've only known one dealer that documents anything. I know some others may but not the ones I've done buisness with. So if they don't record sales, I too wonder if they even exist as far as a buisness is concerned.

First of all you are confusing debits and credits with increases and decreases. Your cash account is actually just a cash account. The more you deposit into or debit that account the more you also credit your owners equity. If you're going to do a double entry system of accounting, your journal entry will explain cash deposits and expenditures. Your inventory accounts can be as complicated as you want to make them. For the moment, consider your inventory as a separate account. You debit your cash account for you operational funds and show an equal credit in your owners equity. As you credit the cash account for purchases (cash account decreases) your inventory accounts will be debited showing the purchase (inventory increases). Owners equity will remain constant because it will not used until you make a profit or do a balance sheet. Your inventory account for the purchases is also an asset but not really tied to OE but you don't use the OE account to credit your purchases unless you make money. As you sell portions of your purchases, you explain the sale in your journal and debit the cash account (Increase in this case) and credit the inventory account (decreases in this case) for the amount of the transaction. Once again OE stays constant unless you make a profit. In that case, say you paid $20 for a series of coins and sold them for $40: you accounting would be debit cash for $40 credit inventory for $20 and credit OE for $20 (you've increase your equity). You do the same for a partial sale with in the limits of the transaction.

Outlays for purchases will never be an expense since you are receiving value for the cash. Unless of course you get horswoggled, then you can write off a portion of the transaction according to IRS rules. Being cheated or experiencing a theft is a deductible expense to a certain limit each year. (OK there are some ways of incorporating inventory to cost of goods sold as an expense, but that's cost accounting in a manufacturing process. Don't confuse the two or let some one talk you into it.)

OK, I can give you the 60 hours of accounting I took in college in one night, but it'll be a long night. There's an excellent book by Pyle and White "Fundamental Accounting Principles", get it. You can probably pick it up at a local college book shop for 5 bucks. Believe it or not, Bookkeeping for Dummies is another excellent reference tool. Read them and try to work some account and journal entry examples out on paper. If things start to gel, take a look at Quicken for their Small Business program. Let me warn you though, Quicken is not as friendly as most think. I think MS Quick Books might be easier.

Actually, a good bookkeeper is not that expensive. If you start making money, I'd eat the expense. Hey he's deductable.

The only documentation that I keep are the invoices for more valuable coins (say over $100). Invoices can be important to prove the provenance of a coin. The most important information of all is what I write on each 2x2 holder. In each case, that includes a full attribution, when and where is was obtained, and for how much.

If you sell an item, say, 15 years later, you can multiply the original purchase price by the inflation factor over the period of time, and so determine if you make a real profit or loss on the item. Inflation information is readily obtainable from your Country's bureau of statistics. A check on current market prices gives you another line of information.

If you want to be strictly legal, a capital gains tax of some sort should be paid, to which an inflation figure is taken into account. This sort of problem can arise when an estate is wound up. Tax authorities don't usually worry about small coin collections, but they can and do take real interest if an investment portfolio of coins is liquidated.

I hated Cost Accounting! That's why I went back to aviation and aviation safety.

Sel691, I'm not familiar with the GAAPs for Australia, but if you are in business to sell coins for profit, you have licence and any profit is ordinary income. For the dealer, this should not be susceptible to capital gains. As a dealer with a private collection is a different matter as is estate planning. If you have a big collection, get a good number cruncher and planner.

I actually found accounting kind of interesting. I wouldn't mind going back and picking up a refresher course.

carmycle: I was really looking at the subject from the standpoint of a collector with valuable items, or an investor.

Actually, my son is an accountant, and he tells me that Australian accounting standards are very similar to those in the U.S., and there is a trend towards a single global accounting standard.

So far as an Australian investor is concerned, if an item is held for more than one year, and was over $100 at the time of purchase, a Capital Gains Tax has to be paid when the item is sold. That helps to explain why I limit my individual purchases to less than $100. A dealer is does not pay a capital gains tax, because he has a trading licence, and normally most of his stock would be turned over within 12 months anyway.

When the calculation of capital gains tax is applied, an inflation factor taken into account, and is subtracted from the selling price. A proportion of the nett profit is taxable, depending on a sliding scale of your income level for the year in which you sell the item. The Capital Gains Tax Law came into effect in about 1987, and there is no Capital Gains Tax applicable on any item purchased before that date, irrespective of the value.

The Australian Taxation Office (ATO) has software designed to match large sales against income, and has the ability to catch a lot of people who try to ignore the sale of large coin collections, and ignore paying Tax.

Wie, since you are not in business to make a profit from your coins, you are doomed to pay short or long term capital gains on coins as an investment; especially if there is a track record. You can deduct from the final selling price fees, interest, mail costs, insurance, storage, and dealer appraisals to offset your income from sale. Even if you don't report the sales, if the dealer you sell to does, you can be in a bit of a spot if a substantial amount of money changes hands. I don't remember which block on the 1040 it is, but each year your are asked by the "code" if you sold coins or antiques during the year. I forget the dollar amount that should be reported. Keep your receipts. And any further question should be sent to Waredo.....I'd love 10%....it's deductible.

Of course you can always be like my father; he always thought it was cheaper to move than pay rent.

And once that new 1099 form reporting goes into effect thanks to the Healthcare reform bill, there will be records if you go over $600 in a years time.