Newbie's experience with gnucash

[Eric Schwartz]

At 02:12 PM 10/16/00 -0500, Bill Gribble wrote:
> > But how does the money get in this "Retained Earnings" (or Opening 
> Balances,
> > if I prefer) in the first place?  It has to come from somewhere, doesn't
> > it?
>
>The global accounting equation is "assets == liabilities + equity".
>Assets are things you have, liabilities are things you owe, and equity
>is the difference between them.  In the example above, you are
>increasing Assets (the bank balance), so you increase Equity to keep
>the equation true.

Ah.  This is something I did not know before.  If it's called out in the 
documentation
anywhere, I suspect BIG FLASHING LETTERS WITH UGLY ANIMATED GIFS ALL
AROUND might help. :)

So, if I want to say, "somebody just gave me $", I have to deposit that $ 
in an Equity
account (as opposed to a normal Bank account), and then I can do with it as I
feel?  As an example, I just got a cheque back from my former apartment manager
for my security deposit.  So I'd create a "Payments Recieved" account of 
type Equity
(perhaps as a subaccount of a general Equity account that would sum up all this
stuff).  I'd record the amount of the cheque in that, and then transfer it 
to the bank
account in which I just deposited it.  Is that the right idea?

> > It seems like gnucash wants a closed system of money, where all
> > there ever is is the money you start with, and that's it.
>
>Actually, that's pretty close, except that you forgot the part that
>you start with 0.  When you have a "debit" in one place, you have a
>"credit" somewhere else, so the net effect is zero and the global
>accounting equation, "assets == liabilities + equity", is always true.

Right, but money has to come in the system somehow, otherwise, I'd never 
make any money.
It sounds like it comes in by way of Equity-typed accounts, which serve as 
a "source" of money
that other accounts can draw from, yes?


> > I shudder to think of the questions I'm going to have once my next
> > paycheck comes in, and I try to record *that*!
>
>It's easy.  You have an Income account called "Income from my job".
>You transfer money from it to your bank account.  Done.

And how does money get into this Income account, then?  Do I have to 
transfer it from an
Equity account?


> > They're already recorded in my Checking account correctly; why do I
> > need to have their inverses recorded anywhere?
>
>It's called Accounting because you have to Account for your money,
>where it goes, and where it comes from.

I feel like I'm beating my head against the wall, sometimes (and I'm sure 
it can't
be much easier for you!)  Why is it Accounting for my money when I create an
Income account and transfer money from it to my bank account, and it's not
when I just add $X to my account, with a label saying, "Paycheck"?  I'm really
not trying to be a prat here-- I honestly don't understand the difference.

>   Due diligence in accounting
>can make your job much easier when you want to do budgeting or other
>cash flow analysis, tax preparation/documentation, or many other
>functions.

Sure-- I just don't see how doing it this way makes it any easier than the
"running total" method (or whatever the proper terminology might be).  I'm 
willing
to be wrong-- hell, I'm almost certain I'm wrong.  But as yet, the 
benefits, whatever
they may be, are not clear to me.

>If you are interested in actually
>understanding where your money is going, you may find that you want a
>program like gnucash that is based in accounting practice.

Sure, and that's why I'm investing all this effort in complaining and 
learning, instead
of just throwing my hands up, and saying, "Nevermind, it's all a load of 
rubbish".  'Coz
I'm sure it's not; it's just harder to figure out than I might have 
strictly deemed necessary.

>If you do decide that you want to start learning how to use gnucash, I
>think the developers would appreciate constructive criticism about its
>design and interface.

The problem I have now is that I understand so little, I'm not sure I can 
even give sensible
suggestions.  One thing that comes to mind, and I'd love some feedback on 
whether or not
I mean what I think I mean when I say this, is that certain types of 
accounts (I'm leaning towards
saying all non-Expense accounts, but I haven't any experience with most of 
them) should require,
as part of their creation, an "Initial Balance", which would automatically 
create an Equity account
called "Initial Balances" (if it didn't already exist), add the appropriate 
amount of money to it, and
then transfer it to the newly-created account.  And, of course, 
automatically create Expense accounts
(categories) on the fly, as needed.  Does that make sense?  More 
importantly, do I understand how
gnucash works well enough that if I did that by hand, the numbers would 
work out properly?

Seriously, I'd love to make suggestions, and I've got a ton of 'em.  But if 
I can't even figure out how to
get my feet wet, then it's hard to make suggestions that make sense.

-=Eric, hoping this makes more sense than his first mail