Depreciation

[Linas Vepstas]

On Tue, Mar 20, 2001 at 05:31:18PM -0700, ghaverla@freenet.edmonton.ab.ca wrote:
> 
> On Tue, 20 Mar 2001 linas@linas.org wrote:
> > It's been rumoured that ghaverla@freenet.edmonton.ab.ca said:
> 
> > > Okay, I gave this Account a name of "Owner Equity", and it
> > > is of type "bank".  It's description is
> > 
> > Hmm, to avoid naming confusion, I think you want to have 
> > "equity" accounts be marked as type "equity", not "bank".
> > In partiucular, this will help when you go to generate a report. 
> > 
> > (Note, the opening balance of a bank account should be represented
> > as a transfer from 'equity' to the bank. All other transfers
> > to/from the bank should be to income/expense/asset/etc accounts)
> 
> To "properly" track depreciation in a small business which
> is NOT making a profit, I need to make a loan from an 
> equit account labelled Owner Equity to a bank account,
> which immediately transfers the funds to a Capital
> Additions account?  Seems like a lot of machinery, but if
> that is the best thing to do, ...  The owner (me) is going
> to be making loans to this company for quite a while.  The 
> space industry is not yet at the point where one can
> make a living at it.

Sorry, don't mean to confuse you. I assumed that you opened the bank
account before you started using gnucash, and that it had a non-zero
balance.

Note: if you are making a loan to the company, that's debt, not equity.
The loan needs to be repaid eventually; it doesn't change the equity
at all, and the interest on the loan is an expense.

If instead, the company sells you stock, then the income from that 
contributes to the equity.

If you legally set up your loan to be convertible to equity (or the
reverse), then you would set it up one way, and then do a transfer when 
the conversion is made.

--linas