Credit Card Account...

[Derek Atkins]

Doug Laidlaw <laidlaws at hotkey.net.au> writes:

> On Thursday 05 June 2008 11:20:34 pm Derek Atkins wrote:
>> Hi,
>>
>> Davey Benson <the.lounge at btconnect.com> writes:
>> > Hi really enjoying GunuCash but trying to figure out this one...
>> >
>> > Under Liabilities I have Credit Card so I've entered some purchases
>> > under payments, say to the tune off £250 then transfered £250 from my
>> > current account which is in Assets. Credit Card Account is showing -£10
>> > when it should be in the black and purchases are also shown in black
>> > despite being a charge on the card - Just a bit confused and probably
>> > missing something very simple :)
>>
>> Yeah, you messed up.  Your purchases should appear as a CHARGE to
>> your credit card, because it's a credit to CC and debit to Expense.
>> You entered them backwards.
>>
>> > Please remember to CC this list on all your replies.
>> > You can do this by using Reply-To-List or Reply-All.
>>
>> -derek
>
> I find it very difficult to come to terms with this.  For example, when my 
> bank account is in credit, that means that as far as the Bank is concerned I 
> am a creditor.  In my books, I have an Asset, therefore a debit.  If I said 
> to someone "I have a debit in my Bank Account" they would start to worry.
>
> Credit cards are simply the reverse of that.  The bank is your creditor.

Correct!   Your bank statements give you the information from THEIR
perspective.  Remember, to the Bank, YOU are a LIABILITY!  So when
they credit your account (from their view) it's a debit from YOUR view.

Credit cards are the reverse in some ways but not in others.

When you buy something, you ALWAYS debit the expense account and
credit the account where the money came from to pay for the expense.
It doesn't matter whether the money is coming from an asset or a 
liability, in either case you're crediting it.

The difference is that in the standard view, a credit will "reduce"
an asset and "increase" a liability.

It's taken me nearly a decade to completely wrap my head about
debits and credits.  It's VERY confusing to non-accountants.

> HTH,
>
> Doug.

> Please remember to CC this list on all your replies.
> You can do this by using Reply-To-List or Reply-All.

-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