Best way to organize accounts

[David Brock]

This is true for a very limited definition of the word "account" but
really, asset accounts and liability accounts are just as theoretical as
expense and revenue accounts, we're just more used to the idea that my
"savings account" (asset) has $X in it, or that I owe $Y on my mortgage
(liability).  In fact, it's called an "account" because that's just what
it is - an account of money.

The bank doesn't have a physical mail slot where they put your $10's &
$20's, rather, they take the money that they've "accounted" for as
yours, and they (usually) loan it out to someone else, and "account" for
it.

An expense or revenue account is simply a record of where the money
"came from" or "went to".  An asset or liability account is where the
actual money "is" or "isn't".

Gnucash, and double entry accounting, does it correctly.

;-David

On Thu, 2006-08-24 at 18:54 -0700, David Bear wrote:
> Actually, gnucash uses the 'double entry' method of accounting. The
> confusion occurs with the word 'account'. A savings account, checking
> account credit card account do NOT NECESSARILY map to an 'account' in a
> ledger. That is why an 'expense account' does not exist in the 'real world'.
> An expense account represents the 'other side' of a two sided entry. Any
> time any 'transfer' takes place whether it is to receive income or record
> and expense there are TWO entries (or two transactions). For example, when
> you buy lunch, you record that as an expense in the category of food. But
> that is only one side. You also need to specify 'where' the money came from
> to pay for the lunch. That money could come from your pocket change (petty
> cash), a checking 'account' or a credit card.
> 
> In your response below you use the word transfer. That is not semantically
> correct either in this contest. There is no transfer taking place. There are
> only 2 entries recording the income. There is an entry in the 'income
> account' called 'interest income' and an entry in the 'asset account' called
> 'checking'.
> 
> On 8/24/06, Derek Atkins <warlord at mit.edu> wrote:
> >
> > eschvoca <eschvoca at gmail.com> writes:
> >
> > > Thanks for the responses.  I think I understand my problem.  When my
> > > bank account makes an income (e.g. from interest) I should transfer it
> > > _from_ an Income account _to_ an Asset account.  I was thinking the
> > > transfer happened in the other direction.  Then my balance in the
> > > Asset bank account should equal the balance of the bank statement.  Is
> > > that right?
> >
> > Yes.
> >
> > -derek
> > --
> >        Derek Atkins, SB '93 MIT EE, SM '95 MIT Media Laboratory
> >        Member, MIT Student Information Processing Board  (SIPB)
> >        URL: http://web.mit.edu/warlord/    PP-ASEL-IA     N1NWH
> >        warlord at MIT.EDU                        PGP key available
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