setting up a car loan

[Phil Frost]

On Thu, Feb 10, 2011 at 04:33:50PM -0800, Harold wrote:
> I seem to be going in circles. The more I look the more confused I get.
> 
> Example:
> I bought a $15,000 car and paid a down payment of $5,000 from a credit
> union account that I have set up in GnuCash.
> 
> The car loan would be for $10,000 and the CU balance would be less
> $5,000.
> 
> As I understand it, I need:
> 1. asset account for the car
> 2. liability account for the loan
> 3. expense account for interest
> 
> The asset account can get its transfer(balance) from the liability
> account, and the credit union account.
> 
> When I enter a payment I split the payment between the liability
> account to eventually bring it zero, and to the interest expense
> account.
> 
> How do I get the beginning balance into the liability account? The
> money has to come from somewhere. What am I missing or what part is
> incorrect?


You answered your own question: "The asset account can get its
transfer(balance) from the liability account, and the credit union
account." The same statement is true backwards: the liability account
gets its balance from the asset account, less your down payment,
plus loan expenses that were financed.

See table 7.1 at http://code.gnucash.org/docs/guide/loans_mortgage1.html
for an example.

Ignore the "Increase" and "Decrease" table headers because they are not
helpful and also wrong. Replace them with "debit" and "credit", and know
that asset and expense accounts are increased with a debit, everything
else is increased with a credit. Thus, in that example,
Assets:Fixed Assets:House is being increased, and so is
Liabilities:Loans:Mortgage Loan. In fact, the only thing being decreased
in that example is the bank account.