Perplexed by application logic

[Geert Janssens]

On Friday 10 December 2010, Talengix wrote:
> Greetings,
> 
> I am new to GnuCash and there's plenty to like about it. However, I am
> confused by a couple things. First of all, all of the 'transferring' of
> funds between accounts seems like a vicious circle. And if I don't want to
> define a transfer my transaction ends up in the dreaded IMBALANCE-USD
> account. Here is the typical scenario for me: 1) Funds received originate
> in an INCOME account. Why doesn't GnuCash automatically update ASSETS
> since money is an by default Asset, right? I think so since the reports
> properly show it that way 2) So next I have to manually transfer every
> INCOME item to my Checking Account in ASSETS. That seems a bit unintuitive
> to me but at least my reports look right. There should be a way to
> configure the INCOME accounts to automatically update specified ASSET
> accounts 
I think you would do good to read up on double entry accounting. The basics 
chapter in the GnuCash Tutorial and Conecpts Guide [1] would be a good place 
to start.

In short, you shouldn't be tranferring between accounts like that, instead you 
should have one transaction with one split in the Assets account and one split 
in the Income Account.

You can choose either of these accounts to enter your transaction. For 
example, open the Assets account register, and enter a transaction there, for 
example 100$. As other account you should choose your Income account.

Should you prefer to enter this same transaction from the Income account, you 
open the Income account register, and enter 100$ income and use your Assets 
account as the other account.

You should only use one of these two examples by the way, they create the 
exact same transaction, which you can verify by looking in to the other 
account register (being Income account in the first example or Asset account 
in the second).

> 3) Next I need to pay a bill so I enter the payment in the
> Account ledger of the recipient which is subcategory under COSTS. This is
> where I am stumped. This amount of course by default winds up in the
> IMBALANCED-USD account.
That is because you don't enter the proper other account. Transactions ALWAYS 
require at least two accounts involved. If you don't setup the other account, 
GnuCash will use Imbalanced-xxx by default. Which asset did you use to pay the 
bill ? That asset should be used as other account.

> But I don't understand that because it is not my
> money anymore once it is paid. So I why is it still there? Running
> transactions reports etc show double my costs because I have the actual
> cost plus the equal amount in the IMBALANCED-USD account. I wish there was
> a way to configure this software so that all payments under COSTS are
> final... that is, simply deducted from my INCOME/ASSETS and gone forever
> (like my money really is when I make a payment). Am I missing something?
> If I look at the getting started tutorial they use an example of buying
> groceries... but the example does not go into enough detail. What happens
> after buying groceries and the money is transferred to the market? It
> should be gone, right? Mine ends up in IMBALANCED-USD.
> 
> I would be grateful for any advice helping to understand what's happening
> here because I really GnuCash otherwise and want to continue using it.
> Cheers, Kevin

As said, read the Tutorial and Concepts Guide. It should get you well on the 
road here.

Geert

[1] http://www.gnucash.org/docs/v2.2/C/gnucash-guide/