double entry question

[Wesley Sheldahl]

Hi Michael.

On 2001.03.24 10:44 Michael P. Soulier wrote:
> On Fri, Mar 23, 2001 at 10:36:52PM -0500, Wesley Sheldahl wrote:

> > For opening balances on Asset accounts, like checking and savings, I
> put
> > matching transactions in Retained Earnings.  For opening balances on
> > Liability accounts like credit cards and loans, I put matching
> transactions
> > in Retained Losses.
> 
>     So in both cases it looks like a withdrawl from the equity account
and a
> deposit into either a bank account or a liability account? Doesn't that
leave
> the equity permanently in the negative, or does gnucash take into account
the
> type of account you transfer to?

Gnucash appears to take into account the type of account I transferred to. 
My 'Retained Earnings' total is negative, my 'Retained Losses' total is
positive, and my total equity of course is those two added together.  I
don't think those numbers will ever change, as I'm not aware of any
transactions that affect equity beyond opening balances.  A business might
get outside investment, but in our family, incoming money gets treated as
some kind of Income, or possibly reimbursed against an Expense.

> > wanted to pre-record it, my guess is you would have a Liability account
> > called something like 'Accounts payable'.  When a bill comes, you would
> > enter it in accounts payable and in the Expense category.  When you pay
> the
> > bill, you would enter it in your checkbook (or whatever Asset account
> the
> > money is coming from) and the 'Accounts payable' category, so that for
> that
> > rare moment when every bill is paid, your Accounts Payable is zero.  
> 
>     Hmm. So if I was anticipating the bill, enter it in accounts payable
> (liability account) and transfer from an expense account? If I then
> transfer
> from my chequing account to the accounts payable, it doesn't seem like
> the
> expense account would balance. 
> 
>     Mike

How would this be different from making a purchase via a credit card or
loan?  In those cases, you add the amount of purchase to both the credit
card or loan account and to the expense account for the category of
purchase.  Or an asset account if you're buying a house or something.  Then
as the loan is paid off, you decrease your checking account and the loan or
credit card account.  Wouldn't an Accounts Payable liability account work
the same way, and stay balanced the same way?  Whether it's a bill due in
two weeks that you put in Accounts Payable, or a 30-year mortgage loan,
both are basically moneys that you are obligated to pay at some point in
time, that you haven't paid yet.  As you pay them, the amount you haven't
paid goes down, and so does the amount you have left to spend.

 
-- 
Wes Sheldahl
wsheldahl@qx.net