Perplexed by application logic

Robert Heller heller at deepsoft.com
Fri Dec 10 13:17:03 EST 2010


At Fri, 10 Dec 2010 09:20:12 -0800 Talengix <kj at talengix.com> wrote:

> 
> Greetings,
> 
> I am new to GnuCash and there's plenty to like about it. However, I am
> confused by a couple things. First of all, all of the 'transferring' of
> funds between accounts seems like a vicious circle. And if I don't want to
> define a transfer my transaction ends up in the dreaded IMBALANCE-USD
> account. Here is the typical scenario for me: 1) Funds received originate in
> an INCOME account. Why doesn't GnuCash automatically update ASSETS since
> money is an by default Asset, right? I think so since the reports properly
> show it that way 2) So next I have to manually transfer every INCOME item to
> my Checking Account in ASSETS. That seems a bit unintuitive to me but at
> least my reports look right. There should be a way to configure the INCOME
> accounts to automatically update specified ASSET accounts 3) Next I need to
> pay a bill so I enter the payment in the Account ledger of the recipient
> which is subcategory under COSTS. This is where I am stumped. This amount of
> course by default winds up in the IMBALANCED-USD account. But I don't
> understand that because it is not my money anymore once it is paid. So I why
> is it still there? Running transactions reports etc show double my costs
> because I have the actual cost plus the equal amount in the IMBALANCED-USD
> account. I wish there was a way to configure this software so that all
> payments under COSTS are final... that is, simply deducted from my
> INCOME/ASSETS and gone forever (like my money really is when I make a
> payment). Am I missing something? If I look at the getting started tutorial
> they use an example of buying groceries... but the example does not go into
> enough detail. What happens after buying groceries and the money is
> transferred to the market? It should be gone, right? Mine ends up in
> IMBALANCED-USD.

Welcome to the world of 'double-entry' bookkeepping.  This is not
something new, it is something accountants have been doing for years
(centuries?). Maybe the first thing you should do is get a good
beginner's intro to what double-entry bookkeepping is and how it works.

A *very brief* explaination is this: money never 'appears' from
nowhere, nor does it vanish either.  In many ways proper accounting is
much like physics: money, like matter & energy can never be permanently
removed from the universe nor created from nothing (much the 'conservation
of matter and energy' law of physics).  In double-entry bookkeepping,
the same rule applies: when you get a paycheck, the money is transfered
from your INCOME account to your CHECKING account.  The INCOME account
thus accumulates your INCOME and at the end of the year, it gives you
the magic number(s) to put on your 1040 form(s). When you buy
groceries, money is transfered from your CHECKING account to your
GROCERIES *expense* account.  Again, at the end of the year, you can
see how much you spent on food.  Money in your expense accounts is not
yours anymore, but the accounts provide an *accounting* of your (various)
expenses -- you'd have multiple expense expense accounts, one for each
kind of expense: food, rent, car, clothing, pets, etc.  It is possible
to have multiple income accounts (your 'day' job, your side jobs,
etc.).  And in addition to your basic checking account, you might also
have a cash in wallet account and maybe a credit card account. Then you
might also have various loan accounts (car, house, student loan, etc.)

> 
> I would be grateful for any advice helping to understand what's happening
> here because I really GnuCash otherwise and want to continue using it.
> Cheers, Kevin
> _______________________________________________
> gnucash-user mailing list
> gnucash-user at gnucash.org
> https://lists.gnucash.org/mailman/listinfo/gnucash-user
> -----
> Please remember to CC this list on all your replies.
> You can do this by using Reply-To-List or Reply-All.
> 
>                                     

-- 
Robert Heller             -- 978-544-6933 / heller at deepsoft.com
Deepwoods Software        -- http://www.deepsoft.com/
()  ascii ribbon campaign -- against html e-mail
/\  www.asciiribbon.org   -- against proprietary attachments


                                                                                                        


More information about the gnucash-user mailing list