Clarification of Account Compatibility Check

[Andrew Sackville-West]

On Sat, Jan 06, 2007 at 11:47:09PM -0500, Ariel wrote:
> 
> On Sat, 6 Jan 2007, Derek Atkins wrote:
> 
> > The groupings are all in the documentation:
> 
> > * Assets + Liabilities (includes Bank, Cash, CC, Stock, Mutual, A/R, A/P)
> > * Income + Expense
> > * Equity
> 
> Can you reverse this change?

I imagine that's asking a lot -- have the entire gnucash project give
up a major sanity check for the sake of your non-standard accounting
practices. see below.

> 
> I have (for example):
> 
> Salary (Income)
>     Accounts Receivable (A/R)
>     Bad Debt (Expense)

I am no accountant, but what you have done here is NOT standard
accounting practice. Accounts Recievable is an asset. Income is money
you have recieved (whether you've actually recieved it or not varies
depending on your accounting method). A/R is money you haven't yet
received, but is owed to you. An expense should never be under an
income account. If you have already claimed the income and something
later becomes bad debt, it would go as a regular expense, or I suppose
you could call it negative income -- reducing your future income --
which may be the way to do it if you are paying a gross receipts type
tax. In that case, lets say you record income in month1 for $200 even
though you've only recieved $100 in actual cash and $100 is owed to
you. So you pay your gross receipts tax on $200. Then later you
determine that the extra $100 will never be paid. So month2 you have
again $100 in real income and you offset that by the $100 in bad debt
and have $0 in gross receipts for that month. This would give you a
net gross receipts over the 2 months of $200 which reflects reality. I
would call this a negative income. You could have a structure like
this

Salary (Income)
       Bad Debt (Income)

Assets
	Account Receivable (A/R)
	Checking (asset)

by convention you could always enter bad debt as a negative income
amount. so you'd see at a glance what your net salary was as adjusted
by your bad debt amount. Also, money that you record in A/R has to
have an income account attached to it already. You could use the
salary account for this purpose:


Month1
Sales Txn      Dr	Cr
      Salary	$100
      A/R		$100

Month2
customer pays  Dr	Cr
      A/R     $100
      Checking		$100

this way you would show an income of $100 in Month1 and get the cash
in the bank in Month2.

> 
> A/R transaction are placed between Accounts Receivable and Salary, and 
> when I get paid it goes between Accounts Receivable and Checking.

this is right.

> 
> I like it because at a glance I can see how much money I actually received 
the amount you actually received is a cash-flow from A/R to checking.

to do what you want here, you really should build a report.

I can understand what you are trying to do here, but it looks to me
like gnucash is going to force you to adopt a more accepted accounting
method. 

> (column Present in Salary). And at the same time I can see how much I 
> "earned" (but won't necessarily see) (column Total in Salary).

the amount you earned is already in salary because you are recording
it with each salary->A/R transaction.

> 
> I use Bad Debt to reduce A/R for stuff that I'm pretty sure is never going 
> to show up.

that's exactly right, but don't call it an expense under an
income. Either call it negative income, or call it an expense
somewhere else.

A
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