Opening the books with a Loan

Maf. King maf at
Wed Nov 11 04:32:46 EST 2009

On Wednesday 11 November 2009 08:13:58 Pablo Francesca wrote:
> Suppose a business starts with zero assets. Suppose they only have a loan
> for X dollars  to start.  This is obviously a liability.  How would they
> open their books in GnuCash?
> I've considered the following: In Opening Balances, decrease equity by X
> and credit (increase) a liability account for X.  This would mean that
> Assets would be zero, Liabilities would be X and Equity would be -X.
> Okay, looks good so far to me.  Perhaps I'm missing something obvious in
> accounting  in the next part. I run a balance sheet report and it tells me
> that Total Liabilites & Equity = 0.   Shouldn't it be X or at least -X?


I think you are missing part of the transaction - where has the money from the 
loan gone?  In a bank somewhere? Under the floorboards?

Surely, the business file is set up with no opening balances for any accounts, 
then the loan is taken, which would be an increase in Liability:Loan and an 
increase in Asset:Bank (or Asset:Cash_under_floor)

Just a thought,

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