Opening the books with a Loan

John Edwards jedwards80 at
Wed Nov 11 16:43:44 EST 2009

On Wed, Nov 11, 2009 at 3:13 AM, Pablo Francesca <rshgeneral at> 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?

Leaving aside the question of why you would take out a loan and put it
into Capital, rather than the bank account, the balance sheet report
is correct.

It doesn't matter how you get there, but your assets have to equal
your liabilities & equity.

If you use A = L + E, then your assets are 0, your liabilities &
equity total to 0. X + (-X) = 0.

If you use A - L = E, then each side of the equation would equal X.

The latter is how I was taught to do a balance sheet.

John Edwards
"You can insure against the weather, but you can't insure against
incompetence, can you?" - Phil Tufnell

More information about the gnucash-user mailing list