Two Income Statement patches: Assets & Value

[Mike or Penny Novack]

Andrew Sackville-West wrote:

>I don't want to rain on your parade, but in my opinion this is the
>wrong thing to do. 
>
>What would be better is to have a separate balance sheet report that
>provides the delta over a time period. I don't begin to know how to do
>that, but IMO, it is the proper thing to do. 
>
>Allowing assets into an income statement flies in the face of any
>accounting I've seen. Note that IANAA. 
>
>A
>  
>
I'm finally going to jump in here too. It has been very frustrating to 
be expected to answer basic accounting/bookkeeping questions being 
trated as "what facility within GnuCash" because the reality is that 
like ANY accounting package, GnuCash can't help you with "what should I 
be doing?" sort of questions.

OK -- Andrew is completely correct here. However different Canadian tax 
laws the basic accounting wouldn't be different. What accounts and how 
reported, yes.

I believe the confusion is between the individual reports produced by 
GnuCash and "the report" (complete financial statement) needed for 
reporting purposes. The USUAL process is that the individual reports are 
generated, think of them as "data" and turned over to the accountant who 
uses them to produce the finished product. That will at least be an 
"Income Statement" and a "Balance Sheet" but might include other 
specialized reports depending on what the complete financial report must 
contain (cash flow might be important, distinguishing between 
unrestricted and restricted funds might be important, for a 501c3 
distinguishing the source of funds, "qualified" or "unqualified" might 
be important).

For example ---- one of the organizations for which I keep the books is 
a 501c3 and the "standard" (GAAP = generally accepted accounting 
principles) format for presenting reports to the board of directors (and 
also used for tax purposes) would be ........
1) Income statements (not called that in the finished product as 
"non-profit" accounting uses different langauge) for the current period 
side by side with that of the previous period.
2) Balance sheets for the ends of the two periods (same as the start and 
end of the current) also side by side.
3) Anything requiring explanation annotated (like footnotes, but using 
the "endnote" format)
4) Any special accounting procedures specified in a general note (say 
what fixed assets subject to depreciation and by what rule)

I asked the accounting type person to whom I was turning over the "data" 
(two Income Statements and two Balance Sheets as produced by GnuCash) if 
I should try to create a custom report to put all that together (I've 
written a few hundred thousand lines of financial system code in my day, 
so COULD do it). He said definitely not, that this was the accountant's 
task, that every accountant would have his or her own favorite editor, 
and as produced by the proposed custom report, would STILL need to be 
edited at least to insert the annotation so savings of effort minimal. 
In other words, to produce a finished product would be more than a 
"custom report". Would need an EDITOR that took the custom report as 
input and allowed the accoutant to then edit it.

That's a LOT of work for very little gain. Suitable editors already 
exist for accountants to use and all that would be saved is the 
copy/paste of data. If there was only ONE "finished product" format 
required perhaps worth while but that's not the case here. What a formal 
report for a 510c3 looks like not necessarily the same as for some other 
form of organization.

Back to the original question which was really "how do I properly keep 
the books to reflect "depreciation" and what information must I be able 
to report for my jurisdiction. That's NOT a GnuCash question. That's a 
"basic business accounting" question in this case with emphasis on 
Canadian tax law. It simply isn't fair to expect the "user guide" of 
GnuCash to cover such a wide range of user needs from "hand to mouth 
cash flow personal budgeting" to "acounting for a 510c3". A work 
covering such a range would be a massive tome with each end user 
interested in just a tiny portion AND total beginners at accounting 
might get inot worse trouble if wandering into the wrong sections.

Frédéric, my best advice to you is go to a library where they have a 
number of accounting texts, look in the index in the back of each for 
"depreciation", then see how good the section of this book is covering 
that topic, and select the best book to learn from. To me (also) the 
very thought that you picture the "depreciation accounting" (as opposed 
to the total depreciation expense transactions) would show up in the 
Inccome Statement tells me that you are starting at the very beginning 
of this subject. This is "double entry bookkeeping". ONE side of the 
transactions recording depreciation ends up as an expense; the OTHER 
side of those transactions is what affects the balance remaining of each 
fixed asset being depreciated (and will affect the Balance Sheet).

Michael D Novack, FLMI

PS -- Please note that I am NOT an accountant, not in any way qualified 
to give accounting advice.