double entry question

[Carol Champagne]

Michael P. Soulier wrote:

>     Hey people. I'm new to the idea of double entry, and I'm far from an
> accountant, and I have a basic question. 
>     I noticed in April's Linux Journal that the initial balance of one's bank
> account would come from a corresponding equity account, but the article did
> not define where the initial balance in the phone bill would come from. If I'm
> just starting to use gnucash and I have an outstanding phone bill, credit card
> balance, etc., where does that balance come from? 
> 
>     Also, would the amount on a bill be a positive or negative value? 
> 
>     Sorry for the basic questions. 
> 
>     Thanks,
> 
>     Mike
I am not an accountant either, but I am trying to come up with an easy 
way to describe opening balances in the documentation.  Is this way any 
easier to understand?

One way to handle opening balances is to just create an account called 
"Opening Balances" of type equity.  Change the register style to 
single-line or basic ledger---this will let you avoid worrying about how 
to balance the transaction, since GnuCash does it for you.

Open the register of the account which needs an opening balance.  On a 
blank transaction line, enter the date and description, then choose 
"Opening Balances" as the transfer account.  The amount goes in 
different columns depending on what type of account you are opening:

1)For bank accounts, enter the amount in the "Deposit" column.

2) For asset accounts, enter the amount in the "Increase" column.

3) For credit card accounts, enter the amount in the "Charge" column.

4) For liability accounts, enter amount in the "Credit" ("Increase")column.

5) For income and expense accounts, you don't need an opening balance 
transfer from an equity account.  When you pay a bill, you usually 
transfer the money to an expense account from a bank account or a 
liability account ("phone bill payable", for example), not an equity 
account.  You record an income deposit as a transfer from an income 
account to a bank account, so you don't need an equity account there 
either.

6) For stock and mutual fund accounts, you are usually transferring 
money from a bank account.  In the case where you are starting to use 
GnuCash and want to enter all of your current holdings as opening 
balances, enter a buy transaction with the original purchase date, share 
quantity and price, and a transfer from "Opening Balances."  You may 
have to enter more than one of these, since you may have accumulated 
several shares of the same stock at different prices.  Entering a 
separate transaction for each lot may help you keep track of capital 
gains/losses later on.


Hope this helps....

Carol