Basic Accounting Concepts - what am I missing?
Mike or Penny Novack
stepbystepfarm at mtdata.com
Sun Jan 2 18:02:03 EST 2011
>You are double-counting. Expenses and income are (at least in Gnucash)
>immediately posted into Assets or Liablilities. In traditional
>journal-oriented bookkeeping, the journal is posted into the General Ledger
>periodically, so that to obtain an intermediate picture, you have to
>consider the journal entries as well as the General Ledger.
>
>
>
GnuCash is standard journal + ledger accounting except that these steps
of first entering the transaction in the journal and then later posting
into the ledger has been automated. Since errors made while posting were
one of the headaches of old fashioned pen and ink on paper bookkeeping
this "autoposting" is wonderful.
Normally we enter the transactions working from the ledger account of
ANY of the accounts affected. We get to specify the other account(s) and
how much split to each (if it is a split). GnuCash builds the
corresponding journal entry for us (you can ask to see the journal; one
of the reports).
The journal is the time ordered record of activity. The ledgers hold
that activity segregated into like types (and then within that ordered
by time). You could think of the whole thing as simply a pile of
transactions (each double entry grouped and ordered in different ways).
BUT --- no, expenses and income are not "immediately posted into assets
or liabilities". That's not what "posting" means. Any transaction
affecting an account of type income (or expense) will also normally* be
affecting an account of type asset or type liability as the other side
of the double entry. All transactions add a net zero to the books (they
remain in balance).
Michael
* Conceivably could be equity on the other side of the transaction. For
example, if I paid an expense of my business using my PERSONAL check
then I have in effect "made an additional investment" in the business --
the opposite of a "draw".
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