Equity type accounts

[Andrew Sackville-West]

David Harrison wrote:
> On 6/24/05, gnucash at madsteer.com <gnucash at madsteer.com> wrote:

> << snip>>

>>For example, I recently sold my truck and bought a van.  So when I built
>>an asset account to reflect the value of my truck, there was an opening
>>balance that is reflected in equity. 
> 
> 
> When you purchase a vehicle, you normally credit (decrease) the bank
> account and debit (increase) the asset account for your vehicle.  This
> should cause no change in your equity.
> 

the reason this causes no change in your equity is simple. If you have 
$1000 in your checking account, and you use that $1000 to purchase a 
vehicle valued at $1000 then you are essentially transfer the $ from 
your checking account to the vehicle. You still have assets that total 
$1000, but its in a different "place"
> 
> 
>>Now, I decreased that account to 0,
>>by making a decrease to the Expense:Adjustement account. 

that account shouldn't necessarily be "adjusted" to 0. If you sold the 
truck, then the money moves from the truck to your checking account, (or 
cash account or whatever). If the $ recieved for the truck were less 
than the book value (amount of asset recorded for the truck), then you 
still have some $ in that asset, but you no longer own the truck. This 
money gets "adjusted"  in one of two ways I know. 1: if you're a 
business essentially as depreciation expense, 2: if its personal then 
your "adjustment" is just as valid as any other probably, though its 
really a capital loss (I think, IANAA) but its not tax deductible (USA), 
its just the cost to you of owning the thing. (on reading further, I 
like "disposal of assets" below. sure glad there are some accountants 
hanging out here!)


> 
> 
> When you dispose of the truck (i'll assume for no proceeds, and assume
> that you have not booked any amortization or depreciation), you credit
> (decrease) the asset and debit (increase) expenses (loss on disposal
> of assets).  This would cause equity to decrease by the cost of the
> truck.
> 

since you sold the truck, equity would decrease by the amount of 
"disposal of assets" or the difference between the $ recieved for the 
truck and the book value of the truck.


A