Pls help model this situation

[James Kerr]

On Tuesday 20 July 2010 jhw wrote:

> Hi Jim, thanks a lot for your quick response.  It's probably
> because I can't get my head round basic accountancy principles,
> but I still can't seem to grok this.
> 
> Does this mean that when I pay the farrier, I don't enter a
> transaction from Checking to Expenses:Horse but instead transfer
> the amount to A/R?  What happens then if he doesn't pay for that
> particular bill - do I transfer from A/R to Expenses:Horse?
> 
> What about owing child support?  I don't want to put an entry in my
> checking account because it's not something that decreases this
> balance - rather it is more like owed income - income I should
> have had but didn't get.  If I put Income:RealDad (it's _me_
> that's the stepfather!) as the other account in A/R I end up with
> a -ve income for him.  That seems to make sense to me: e.g.
> Income:Salary shows $2000 and Income:ReadDad shows: -$720.  That
> looks ok - apart from the fact that Income is then shown as a
> total of $2720, because gnucash sums the absolute values for some
> reason.  So while I understand how I can put new amounts for
> physical expenses into A/R when I pay bills, I don't see where
> money like the missing child support is supposed to come from. 
> Well I know the person it's supposed to come from, just not the
> gnucash account!
> 
> Sorry for being so dim.  Any help you can dispense is most welcome.

Sorry for confusing the relationships! (I blame old-age!)

My understanding is that the Horse expenses are RealDad's expenses and 
that you are acting, in a way, as a go-between. Paying the bills and 
recovering the cost from RealDad. If this is correct then the  
expenses are not your expenses and the payments to you by RealDad are 
not your income. Hence, income and expense accounts are not involved 
in those transactions. 

The entries that I gave in my previous message are all that are 
required (with Stepfather changed to RealDad, of course!).

Child support is different, in that it is your income (and the 
expenses of maintaining the child are obviously your expenses.) If 
RealDad fails to pay child support, when due, then the usual 
accounting practice would be:

Debit (increase) Receivable from RealDad
Credit (increase) Income - Child Support

When he eventually pays:

Debit (increase) Bank
Credit (decrease) Receivable

If he never pays up, then eventually:

Debit (increase) Bad Debts expense RealDad
Credit (decrease) Receivable

The timing of this last entry (if it becomes necessary) would depend 
on your assessment of the situation.

You may want to keep separate Receivable and Bad Debts accounts for 
Child Support and Horse expenses, respectively.

I hope this helps.

Jim