Hello,

I'm still learning my way to do proper accounting, and hopefully some of you can point me to the right direction. I work for a manufacturing company where we build custom machines for clients. For this case, I pretend that my end product is a bike, and the parts I need are frame, wheels and handle bar. One of the specific things my employer wants to know is how much money has been spent on a specific project (bike building). So, if a project has only used frames and wheels, my boss wants to know whats the cost of them.

More or less, the scenario is like the following:
1. Buy Parts from Supplier (we usually pay by the end of the month)
2. Use Parts for project
3. Sell finished product.

From the above scenario, here's the journal I have:

Buy 1 frame for $100, 2 wheels for $50 each, and 1 handle bar for $70
1. Debit Inventory $270
Credit Account Payable $270

Use only the frame, and two wheels for project
2. Debit Cost of Goods Sold $200
Credit Inventory $200

Now, at this point, pretend that it is already the end of accounting period (with some unfinished project is still going), and I have to make the balance sheet.

From the above journals, I only have:

Asset:
- Inventory: $70
----------------------
Total Asset = $70

Liabilities:
- Account Payable: $270

Now, in order for the balance sheet to work, Asset = Liabilities + Equities, right? So, my equity should have been -$200. Which account should I use to write this in the journal?

If I was to create an Income Statement also, I can see that:
Revenue: $0

Cost of Goods Sold: $200
Other Expenses: $0
--------------------------
Net Income (Loss) = -$200

So the value of net income and the missing part from equity is the same. Should I be doing another journal to write this down to make my balance sheet balanced? If so, can you let me know which accounts should I credit and debit?

Thank you,

You are right joemicro and for you rezmuh if you really want to be a accounting professional then you have to learn the basics and come up gradually. If your base is strong then your building will be very solid.