if own a restaurant and treat my childhood friend to $150 worth of alcohol and food for free, from an accounting standpoint am i out $150 or am i only out whatever i paid wholesale for the food/alcohol and associated labor manhours that went into preparing them?
If own a restaurant and treat my childhood friend to $150 worth of alcohol and food for free...
Jordan Bennett
Jordan Ward
First of all, terrible Englando. Secondly, you're out the cost of food + your labor. You could however consider that you're actually out an opportunity cost which would be the profit you would make on that meal. The thing is, your friend wasn't going to eat there unless you invited him, and you had every intention of feeding them, so you had no lost opportunity cost. Also, this is a retarded question.
Bentley Perez
>You could however consider that you're actually out an opportunity cost which would be the profit you would make on that meal.
yeah i was thinking this. it's a $150 tab that somebody else would have paid. i'm just wondering what is the "proper" way to look at it.
>so you had no lost opportunity cost.
but my friend occupied a seat and consumed resources that anybody else on the street would have paid $150 for
Camden Gomez
At this point I assume we're purely talking about this academically - Is your restaurant completely full with a line out the door? In that case you've definitely had lost opportunity. If not, you haven't. I don't like this question because you're talking about treating a friend in one breath, and then them consuming your resources you could sell in another. I like the thought experiment, but the subject isn't great. Presumably, you're investing in the relationship you have with them by treating them - something this question doesn't even begin to touch on, and quite frankly is difficult to quantify.
Jayden Thompson
it's a perfectly valid question of accounting, i don't understand why you're being so antagonistic/flippant about it, if you're unsure just say so and move on
Dominic Wright
It depends on if you do accounting based on cost or on sale price.
Isaiah Clark
doesn't all accounting revolve around profits anyway?
Alexander Phillips
>CUNT and a FAGGOT
Easton James
No, it isn't straight forward at all. There's a social aspect to it you brainlet.
Nathaniel Brown
I'd be surprised if you were considered to have lost money you never actually had. That seems like it would cause the tax system of your country to fall apart.
- Not an accountant or tax person btw
Landon Cooper
where did i say it was straight forward? i simply said it was a valid accounting question. learn to read.
>brainlet
you're not being very helpful, why don't you go post in a pajeet coin thread instead
Dominic Wilson
Your COGS increases - debited. Inventory is credited
Easton Mitchell
Okay two things:
1) Profit is just one aspect of the total cost of something.
2) It makes no difference if you sell a product or service or if you give it away for free in terms of how much it costs you.
If you give a product or service away then it can only cost YOU the direct and indirect costs (materials, labour, overheads, etc.). Everything that follows over and above those costs (i.e. to the CUSTOMER) will be profit. This loss of profit is not a cost to you, as profit is by definition the last chunk of sale price (after costs) involved in the total price of something.
Also, profit rates vary and are constantly negotiated upon. Why you would care as a business about this loss of profit as if it were a cost or loss? Do you think businesses care or consider it loss when they discount items in sales?
Cameron Reyes
>Do you think businesses care or consider it loss when they discount items in sales?
i would assume that this would be one of the things they care about the most. it's all about profit anyway, why wouldn't they pay attention if what they are selling is bring them in a profit, barely bringing them in a profit, not bringing them in a profit at all, only being sold at a loss/etc.?
>this loss of profit is not a cost to you
i think i know what you mean but i still struggle to see it that way, at least in terms of opportunity cost
Jack Morales
There's a few ways to approach this problem.
First, the direct costs are the price you paid for the materials (pasta, sauce, meatballs, cheese, alcohol). That would be factored into the cost of revenue category, since you paid some other company to obtain them and paid sales tax on them.
After that come your labor costs to prepare the item, and all of your ammortized operational and capital expenditures indirectly related to the item-- the glass for the wine, the plate, the stove, the gas, the building rent, the health insurance for the bartender etc etc. All of this affects your profitability and therefore the price you charge for the item.
As far as reporting the $150, you could either chalk it up as a marketing expense, depreciation due to spoilage, and invoice that was never paid (aka $75 in lost materials and labor), or you could purchase the item using your personal money and then the full 150 goes towards your business' revenue.
And as for the opportunity cost thing, that's just economic theory, not accounting. I am losing billions of dollars by not becoming the next Elon Musk. It doesn't mean that I can bill anyone for this lost money if I don't achieve it because I'm smoking weed at home instead,
Nathaniel Lopez
>invoice that was never paid
It's a restaurant you dipshit. He's not booking any A/R
Asher Lopez
>i would assume that this would be one of the things they care about the most
When any retailer or business discounts they just lower the profit margin in the sale price. If you think they're selling at anything CLOSE to a loss then you are severely underestimating the profit margins that are involved in sale prices.
Unless of course you are talking about everyday and low value items with more marginal profit rates, in which case the more important thing is volume of sales. If you reduce a profit margin from 5% to 2% it might be a big difference in income if the sales stay the same - but the point is you then sell more units.
Things aren't sold at a loss unless the business is failing. When things are heavily discounted it is either because a business has exceptionally few overheads and costs, the profit rate was so high to begin with, or because it is to spread their market or gain customer loyalty before then increasing profits back.
You shouldn't be looking at reducing/even losing profit margins in terms of an actual cost or loss to a business, because it isn't.
Juan Wright
thanks for the accounting tricks, i'll try to remember them
so tl;dr it's technically just whatever the cost of the meal was before profit?
Logan Lopez
Oh really, you INSUFFERABLE faggot?
Then what is it? A receipt? Oh wait, a receipt is proof of payment, which, hey, he didn't FUCKING pay.
You're telling me a restaurant, whether for catering or retail or consulting services or anything, in the history of mankind, has NEVER issued an invoice to anyone, ever?
How fucking dense can you be?
Jacob Jenkins
Yeah. Cost is money spent, profit is profit.
Nicholas Rivera
but can i hold the fact that i treated him to a $150 meal over his head in the future when it comes to whatever he decides to treat me to on the up and up?
Andrew Brown
You can hold him to whatever price he will believe. There's 3 scenarios:
1) You tell him the meal was $50. It cost you $100 to prepare, and you would normally charge $150 to customers. He gets a bigger bargain than he believes.
2) You tell him it was $150. He believes he gets a really good deal.
3) You tell him it was $150,000. He either calls you out on your bullshit fake prices, or he is extremely gullible.
Whichever way, it still cost you $100 and that is the "cost" of the meal you "gifted" to him. It isn't the "price" you would charge customers, which can literally be 10 billion if you wanted.
Jordan Brown
>trying to benefit from gifts
Oy vey!
I mean, I guess you could. He could, of course, then say that it wasn't a $150 meal because a) it was strictly speaking a $0 meal because nothing was paid for it, and b) there is nothing to suggest that he would have accepted that price for it. From a negotiating perspective you would be far better off using what it cost you.
Alexander Taylor
> a receipt is proof of payment, which, hey, he didn't FUCKING pay.
you retard, you don't get a receipt if you haven't made a payment. you can't "not pay" a receipt, it's not a fucking invoice.
Kevin James
Credit inventory $150
Debit CGS $150
Credit salaries expense $3
debit wagecucks payable $3
Lincoln Butler
>I mean, I guess you could. He could, of course, then say that it wasn't a $150 meal because a) it was strictly speaking a $0 meal because nothing was paid for it, and b) there is nothing to suggest that he would have accepted that price for it. From a negotiating perspective you would be far better off using what it cost you.
i disagree. he saw the prices on the menu. he knew precisely what he was getting into.
Luis Myers
t. the only one who went to college
Everyone else nut off
Oliver Morales
You write it off as food waste
Xavier Wood
Way to just slime your way out of that one. You called me flippant for questioning me on the intent of OPs question. There are two completely different questions there - what is the literal cost of this, and what is the impact of this. I never said this wasn't a legitimate accounting question, as evidenced by the fact that I answered it. Do you enjoy going on the internet to be pedantic and not add anything to conversations?