loan explanation

[Yawar Amin]

Hi,

See below for the appropriate transactions:

T. Howell-Cintron wrote:
> I've tried following the guide and documentation but get lost along the
> way because of the complications involved in dealing with interest and
> the accumulation of assets.  I'm hoping someone on the list can set me
> straight.
>
> The situation is this:
>
> I've been given a $1000 loan, interest free, and that I'm to repay at my
> leisure.  This transaction took place before I started using GC.  At any
> point I may borrow even more money from the same source.
>   

For the initial loan:

Date: whenever you got the loan initially
Description: who/where you got the loan from
Debit Assets:Checking $1,000
Credit Liabilities:Loan $1,000

> I would like to track my payments from Assets:Checking to the loan,
> Liabilities:Loan,
>   

For each payment:

Date: date of payment
Description: who/where you got the loan from
Debit Liabilities:Loan $how much you repaid at that point
Credit Assets:Checking $same amount

> but I'd also like to track how the money loaned was
> spent (ie, $100 goes to Expenses:Computer).

Date: date of purchase
Description: name of the computer shop
Debit Expenses:Computer $100
Credit Assets:Checking $100

> I'd like to know how much I
> owe on the loan at a glance.

As you track your activity on the loan with the above (and below)
transactions, you'll get the account balance on the GnuCash Accounts
page, or from the Assets & Liabilities > Balance Sheet report.

> And, as I said, I'd like to have the
> ability to add more to the loan on-the-fly.
>   

Date: date borrowed more
Description: who/where you got the loan from
Debit Assets:Checking $how much you borrowed
Credit Liabilities:Loan $same amount

> I created the Liabilities:Loan and entered an increase of $1000, but
> then suspected it should have been a decrease of $1000,

I think for liability accounts, `increase' means credit, and `decrease'
means debit. In this case, you're on the right track.

> and still
> couldn't figure out where to attribute the transfer from.  Do I need a
> special Equity:Opening Loan Balance or something?
>   

As you can see above, the money is credited to the loan account and
debited to the asset account. Or, it increases the amount of the loan
and also increases the amount in your checking account. Yeah,
double-entry accounting is a bit counter-intuitive. It took me quite a
while to get used to this.

> I've been tinkering with this for a while and have yet to come up with a
> working solution, so I hope someone on the list will forgive my daftness
> and point me in the right direction.
>   

Final tip: enter all the transactions in the General Ledger (Tools >
General Ledger), so you don't need to worry about which account you're
entering transactions into. Of course, you can enter any transaction in
any account window and it'll automatically get put into the right
windows, but I won't get into that here.

Cheers,

Yawar


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