Bank account vs assets issue

[Derek Atkins]

Wouter van Marle <wouter at squirrel-systems.com> writes:

> Hi all,
>
> I've a problem calculating assets of my small business properly. The
> issue at hand: I'm running an office on behalf of another company (not
> owned by me), and share this with my own company. As I do not have
> access directly to the money of this other company, I take care of many
> expenses related to running the office (rent, utilities, coffee,
> whatnot). Once a month or so I invoice this to the other company.
>
> Now the problem is that I can not properly calculate the assets of my
> own company, and in the same time have a correct bank account. A snippet
> of my account tree:
>
> - Assets
> 	-- Bank account
> 		-- Expenses/income my company
> 		-- Expenses/income other company

Um, Expenses aren't Assets.  They don't belong here.

> Now the balance given in "Bank account" is an accurate statement of the
> cash at hand - very important. But the Assets total is not only the
> assets held by my company, it also includes the balance held by me of
> the other company, which (positive or negative balance) is not my money,
> and therefor should not be included in my assets.

I can't see how it could ever be an accurate statement with the
"Expenses" under it.

> Any suggestions on how to handle this?

Um, search the archives -- this has been discussed numerous times.
You want to use a split transaction.  You need three accounts:

  Assets:Checking
  Assets:Owed-by-Company-2
  Expenses:<category>

Let's say you buy an item for $1000 and the "cost" is shared by both
companies equally.  When you make a purchase for a shared item, you
account for it as:

  A:C       $1000
  A:O               $500
  E:Item            $500

So your checking account has gone down by $1000, but it's only a $500
expense to YOU.  The other company now owes you $500 for their share
of the item.  When they pay you that money, you just transfer that
$500 back into your checking account.

-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