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Transferring Personal Items as Inventory in My Own Business

waverwaver Member Posts: 5

I own some brand new items (clothes) that I originally bought for myself but never used.

What's the proper accounting process to "sell" / transfer these items to my small business (sole proprietorship) as inventory?

I have the original receipts.

Am I right in thinking that I the business can just simply purchase them from myself at the original price and record that under Inventory?

Many thanks!

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    AlexiaAlexia Member Posts: 3,314 ✭✭✭✭

    Hi, @waver.

    If you're just donating them to your business, you can just create an expense transaction using "Owner's Investments/Drawings" as the account and your inventory account as your category.

    If you want to repay yourself for the value of those clothes, make another expense transaction, this time from your business' bank account with "Owner's Investments/Drawings" as the category.

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    waverwaver Member Posts: 5

    Conversely, what are the GAAP rules (if any) on how to draw inventory items from a sole proprietorship for personal use? For example, I bought two (2) T-shirts through the business as stock at $10 each. I later realize that I just want to use them myself. Do I just DR Inventory and CR Owner's Drawings for $20?

    Thanks!

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    ErikErik Member Posts: 194 admin

    Hi @waver!

    Just to confirm: is your Inventory account an asset account? This should be the case but I wanted to double check based on the DR/CR order you have there.

    To represent this, you should be able to CR Inventory (decrease its value) and DR Owner's Investment/Drawings

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