Don't understand imbalance
hh6199 at yahoo.com
Fri Nov 21 16:15:36 EST 2008
The way I have been doing it goes along with my thinking this way:
I make several purchases with my credit card. This represents money from my bank account but it hasn't been taken out yet. When the bill comes in then I take the money from checking and pay the credit card bill and allocate the different purchases to the different expense accounts.
I am not arguing and definitely am not an accountant, but I don't see the need to go through two more steps of posting the purchases in liabilities or accounts payable and then having to relieve those accounts. To me, my way cuts out a couple of unneeded steps for my home finances.
I will just delete the transaction and re-enter it and post back what I have then.
--- On Fri, 11/21/08, Mike or Penny Novack <stepbystepfarm at mtdata.com> wrote:
From: Mike or Penny Novack <stepbystepfarm at mtdata.com>
Subject: Re: Don't understand imbalance
To: hh6199 at yahoo.com
Cc: gnucash-user at gnucash.org
Date: Friday, November 21, 2008, 1:24 PM
> I don't record the credit card charges as I incur them. I don't
use liabilities and then pay them. As I understand accounting (not very much) I
am operating on a cash basis and therefore just pay the bills when then come in
and are due.
Confusion as to what is meant by "cash basis". Concepts like
"accounts receivable" and "accounts payable" aren't
limited to "accrual bookkeeping".
Perhaps the confusion is because you used the card for the purchase of physical
goods of some sort? Try this example. Using your credit card, you go to an ATM
and obtain money. You wouldn't think of this as if it were income, would
you? Yes it's an increase in assets (cash in pocket) but it's also an
increase in liabilities (credit card balance). When did you experience this
increase in cash in pocket? When you took it from the ATM or when you later
wrote a check to pay the credit card bill? It wasn't the same as if you
waited to the date at which you later paid the bill, walked into the bank, and
cashed a check was it?
The same with the expense side. You buy something with the credit card instead
of with cash from pocket or check from checking account. You bought it when you
bought it, not later when you paid the bill. In between you owed somebody cash.
Accrual bookkeeping is something else.
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