What's the best way to record this?

[Ryan Flegel]

On 4 January 2011 08:18, Mike or Penny Novack <stepbystepfarm at mtdata.com> wrote:
>
>> A have a related question to these types of accounts. Oftentimes,
>> these types of accounts ("loans" to/from friends) fluctuate one way to
>> another so they can be assets or liabilities at different points in
>> time. What's the best way to deal with this? Keep two accounts and
>> when either one hits zero switch to the other?
>>
>> eg, if I owe a friend $100 and pay them $150, subtract the first $100
>> from the Liability and put $50 into an Asset account?
>>
>>
>
> Depends. Perhaps part of the trouble is not understanding at the debits vs
> credits level.
>
> An account of type "asset" is an asset if it has a net debit balance (normal
> state). If it has a credit balance it is a liability. An account of type
> "liability" is a liability if it has a net credit balance (normal state). If
> it has a debit balance it is an asset.
>
> What I would do is decide (based upon history) which way is normal for money
> owed between yourself and this friend and put the account there.

Thanks for the tip.

-- 
Ryan