how to view total for expenses subaccount

[Donald Allen]

On Thu, Oct 30, 2008 at 9:01 AM, Mike or Penny Novack
<stepbystepfarm at mtdata.com> wrote:
>
>> Correct me if I'm wrong, but I believe this is not necessarily true.
>> For example, if income > expenses during an accounting period, but the
>> value of your assets decreases during that period by an amount greater
>> than income-expenses (as many of us have experienced during the recent
>> stock market turmoil), your net worth decreases, contrary to what you
>> said above.
>>
>
>  No --- if income > expenses for a period then the net worth is increasing.
> But you have to do your books entirely "cash" or entirely "accrual", can't
> mix the two together. We'll use your examples.
>
> At start of period
>  Assets     = 30,000
>  Liabilities = 25,000
>   (net worth is 5000)
> At end of period
>  Assets    = 15,000
>  Liabilities = 5,000
>    (net worth is 10,000)
> Income for the period was 5000 > than expenses. Net worth has increased by
> 5000 even though the amount of assets has decreased, the amount of
> liabilities decreased by a larger amount.
>
> The stock market turmoil example to which you refer is the confusion that
> results when you try to combine "cash" and "accrual" accounting in the same
> set of books. You can't do that. If you are strictly on the cash basis then
> those stocks haven't changed their asset value (yet). If you are on the
> accrual basis and so taking into account their decrease in market value then
> you also have the expense "unrealized losses in investments".
>
> You might find it useful, perhaps necessary, to maintain two sets of books,
> one on the "cash basis" and one on the "accrual basis". Possibly even more
> sets of book., For example one on a "personal basis" (sorry, but for tax
> purposes, the "expense" of the food you eat is not an expense for tax
> purposes). One instance of the application GnuCash can be used for all of
> the sets of books, those are simply separate files perhaps even kept in
> separate directories (file folders). What books you keep depends upon your
> needs for information, financial planning, tax reporting, etc.

I understand -- thanks. This is why I'm not an accountant.

/Don

>