Double entries

[Richard Thomas]

Hi Maf,

Thanks very much for explaining that concept, I have gone through and
allocated each of my transactions a relevant expense or income account.

It makes a lot of sense now!

Thanks again,

Richard.

On 20 July 2012 10:53, Maf. King <maf at chilwell.net> wrote:

> On Fri 20 July 12 09:51:27 Richard Thomas wrote:
> > Hi,
> >
> > Thanks for pointing all that out, I have given the concepts and tutorial
> > guide a read and understand about the double accounting system now (which
> > admittedly I had no idea was the way that GnuCash worked).
> >
> > There's a few things I'd like explain at this point...
> >
> > Firstly, the way I have been entering transactions.  If I can take the
> > "buying a pizza" example (just search the PDF for "pizza" and you'll see
> > it).  I would typically pay for a pizza using my debit card, so I'd enter
> > the transaction in my Checking Account (the only account I really use).
>  So
> > in the description, I enter the name of the pizza place that I ordered
> the
> > pizza from.  The default "Transfer Account" that is used is called
> > "Imbalance-GBP".
> >
> > Whether this is the correct Transfer Account for this type of
> transaction,
> > I really don't know.  All I know is that the Transfer Account should
> really
> > be the pizza place's bank account, as they are the ones receiving the
> money
> > that I am sending.
> >
> > I have tried to figure out from the guide what the correct way of using
> > GnuCash is for this type of activity, but I don't mind the Transfer
> Account
> > being Imbalance-GBP, as long it does not seriously go against GnuCash's
> > principles or cause me a really big headache down the line.
>
> Hi Richard,
>
> You _can_ just use the imbalance account, but it is really against the
> point
> of GC and double entry.
>
> Let's suppose that you have 3 transactions showing on your bank account.
> 1. you bought pizza (an expense)
> 2. you bought some petrol for your car (also an expense)
> 3. you put £50 into a high interest savings account (not an expense)
>
> Would it be useful to you to know how much you spent on pizza in a given
> week/month/year/lifetime against what you spent on petrol?  Could you
> concieve
> that similar analysis might be useful in the future?  What if you wanted to
> keep track of different income streams, perhaps because they are taxed at
> different rates (im thinking UK savings interest and ISA interest, for
> example)
>
> Trasnaction 3 isn't an expense at all - you keep the money to spend later
> on,
> but if you just pour it into the imbalance hole, then it would appear that
> you
> don't have any savings building up....
>
> This is where the GC transfer accounts come in to play.  By having an
> expense
> tree that is as complicated as you think you may need later on, you can
> report
> on the numbers that have been spent on each different type of expense (or
> income)
>
> EG. you could have a tree that looks like:
> Assets
>      Bank Current
>      Bank Savings
> Income
>      Wages
>      Taxed interest
>      Untaxed interest
> Expenses
>      Food
>            Supermarket
>            Pizza
>            Fish & Chips
>      Car
>            Fuel
>            Insurance
>      Taxes
>              PAYE
>              tax taken from interest
> Liabilities
>      Bank Loan
>      That loan from Dad from years ago (might repay one day!)
> Equity
>      Opening Balances
>
> And you can make it as complex as you need. (eg Pizza and Fish&Chips could
> be
> recorded in a combined "takeaway" account, or you could furhter split pizza
> into Dominos/Pizza Hut/Fred's Pizza Emporium etc.).
>  Also, this keeps track of other investments etc. that you may have, by
> creating the relevant accounts under the Assets section.
>
> (Equity:Opening Balances  is a "cheat" account to let you correctly set the
> bank balances on the day that you start to use GC)
>
> I think that you have taken the term "transfer account" too literally in
> your
> post above.  Your records aren't concerned with the financial details of
> any
> other orgainsation (sort code etc.)  "Transfer Account" in the GC context
> means "allocate this money to this type/category of expense (or income or
> savings account etc)"
>
> I suggest that the very least, you should create Expense and Income
> top-level
> accounts, the imbalance-GBP is intended to catch data entry errors and
> shouldn't really have any transactions in it. (you could rename the one you
> have already rather than starting over or editing each transaction!)
>
>
> HTH,
> Maf.
>
>
>