RFC: Chapter 8 Tutorial/Guide

[Chris Lyttle]

On Thu, 2003-07-10 at 08:43, Jon Lapham wrote:

> =================================
> assetloan_concepts1.html
> compare to:
> 
> This is the intro to the chapter.  My only question to the list for this 
> page is whether you think these 3 subjects belong in the same chapter 
> (asset depreciation, asset appreciation, and loans).  It seems to me 
> that loans are a different animal?  No?
> 
Well, the title of the chapter does have 'loans' in it, I think that
even though you have renamed the chapter to 'Monitoring Assets and
Loans' (I'm not sure what 'monitoring' means in this context, it doesn't
seem to me to clearly state what the chapter is about) that it should
generally be a chapter about how to deal with 'things that affect the
value of what you own' and to me that's loans, interest, appreciation
and depreciation. BTW, I really think you should try to rewrite these
rather than cutting and pasting them as is (if that's what you've done).
My comments on the text of this section are;
- A lot of the language used here is technical and vague, for example
'The prototypical example of a asset to which this is often applied is
an automobile.' and 'Usually asset appreciation is called Capital Gains,
and are typically not recognized until the asset is sold. At the instant
the asset is sold, the entire gain becomes income.' Try to approach this
as a user who doesn't understand accounting concepts such as asset
appreciation and explain in relatively simple terms what a concept means
when it must be used. Really the people who understand accounting are
not going to spend much time in the tutorial, they'll basically be
looking for 'how do I do this' type help. Also try to avoid big words
like 'prototypical' no one really knows what they mean (I had to look it
up) and using simpler words gets your meaning across far better. The
above sentence would easily get its meaning across without that word.

> =================================
> asset_dep1.html
> 
> This is the section on asset depreciation.  My questions for the list 
> here is in section "8.2.3 Handling Depreciation in GnuCash".  This is 
> directly copied from the 1.6 documentation, and it mentions that you 
> need 3 accounts: "Asset Cost", "Accumulated Depreciation", and a 
> "Depreciation Expense" account.  I do not understand what the 
> Accumulated Depreciation account does.  It does not appear in the 
> example.  Ideas?
> 
> Also, if you have multiple assets you want to track, obviously you need 
> multiple "Asset Cost" accounts.  But, can they share the same 
> depreciation expenses account, or should they each have their own 
> depreciation expense accounts?
> 
I like the way you have set out this chapter, it clearly define's at the
beginning what depreciation is and why you would use it, then goes on to
give concrete examples in section 8.2.2 on different schemes for
depreciation. I think, though, in section 8.2.3 you didn't depreciate
your asset correctly. Looking at my accountant's financial reports, he
includes depreciation as an _asset_ in the balance sheet which is in the
negative to offset the value of the asset. If I'm correct about this (I
may be wrong) Asset Cost would have the initial value and the
depreciation would be put into the Accumulated Depreciation. The
Depreciation Expense account would be used for expenses such as repairs
on your car that increase its value (slightly) and therefore change its
depreciation schedule. For example, if I buy a car it starts to
depreciate the day I buy it. If I then go out and spend $$$ putting
chrome wheels and a turbocharged engine in it this is an expense I pay
out that increases it's resale value but the car in general will keep
depreciating so the expense is 'periodic'.

> 
> =================================
> asset_app1.html
> 
> This is the section on asset appreciation.  My question is about the 
> example given at the end of "8.3.3. Capital Gains in GnuCash: Selling 
> the Asset".  It doesn't seem to match any of the 3 possibilities... or 
> am I just an idiot?
> 
I think here again you've misunderstood what is happening. The $1200
value you increased your painting by should go into an _asset_ account
and from an _asset_ account. As to section 8.3.3, I looked at both the
old one and your's. This is really badly written with the examples not
matching the screenshots at all and just confusing matters entirely with
the liberal use of income and asset all over the place. If I am
understanding at all what was written here, I surmise it to be this (I'm
going to simplify the example more);

1) Painting bought $12,000 - transfer $12k from Bank account to Painting
Asset account.
2) Unrealized value increase of $1200 - transfer $1200 from Accrued
Unrealized Gains asset account to Painting Asset account
3) Sell the asset, 3 possibilities -
	i) Value the same, $13,200 to bank, $1200 from Realized Gain 	income
account to Accrued Unrealized Gains
	ii) Value less, $12,500 to bank, $500 from Realized Gain income
	account to Accrued Unrealized Gains asset account, $700 from 	Accrued
Gain income account to Accrued Unrealized Gains asset 	account.
	iii) Value more, $15,000 to bank, $1800 from Accrued Unrealized 	Gains
asset account to Painting asset account, $3000 from 	Realized Gain
income account to Accrued Unrealized Gains asset 	account.

This is possibly missing something, but its my best stab at the mess
that is that section.


Chris
-- 
RedHat Certified Engineer #807302549405490.
Checkpoint Certified Security Expert 2000 & NG
--------------------------------------------
	|^|
	| |   |^|
	| |^| | |  Life out here is raw 
	| | |^| |  But we will never stop
	| |_|_| |  We will never quit 
	| / __> |  cause we are Metallica
	|/ /    |
	\       /
	 |     |
--------------------------------------------