Bill vs payment

Buddha Buck blaisepascal at gmail.com
Sat Jan 12 10:41:42 EST 2013


I think everything is working as it should until you apply your
solution.  In other words, the first problem you see isn't a problem,
it's how things are supposed to work.

Here's a moderately complex, but realistic example.  Let's say you
ordered from a vendor $1000 in widgets for the product you make.  The
time line for this order is as follows:  March 25th, you place the
order; March 28th, they ship the widgets to your factory and mail the
bill (dated March 26th, due April 10th) to your office; March 30th,
you receive the bill; March 31st, you receive the widgets; April 5th,
your accountant has finished the end-of-quarter reconciliation and
reporting and can send the vendor a check for $1000.

In accrual accounting, you record expenses when they occur, not when
they get paid.  (You also record income when it occurs, not when the
money goes in).  In this example, you ordered the widgets and were
billed for theml in one accounting period (March, Q1), and paid for
them in another accounting period (April, Q2).  So the expense should
be recorded in March, while the Payment should be recorded in April.
During the intervening time, you have a liability to the vendor to pay
that unpaid bill.

You want to end up with the following transactions:

March 26th: Widgets, debit Expenses:Materials $1000; credit
Liabilities:Accounts Payable $1000
April 5th: WidgetCo Incorporated, debit Liabilities:Accounts Payable
$1000, credit Assets:Cash $1000

In GnuCash, you would handle the transaction this way:

1. You would use Business->Vendor->New Vendor to enter WidgetCo
Incorporated as a new vendor
2. On March 30th, you would use Business->Vendor->New Bill to enter
the bill received from WidgetCo, entering as a line-item Widgets,
Expense Account Expenses:Materials.
3. After receiving the widgets on March 31st, you would post that
bill, with a posting date of March 26th and a due date of April 10th.
4. On April 5th, you would use use Business->Vendor->Process Payment
to pay the bill, using Assets:Cash as the payment account.

This will give same transactions I gave above.  This seems to be what
you said you were getting, but that you expected the payment to be
debit Expenses:Materials $1000, credit Assets:Cash $1000.  That would
be wrong in this case because the expense and the payment didn't
happen simultaneously, and the records should reflect that.

If the expense and payment did happen simultaneously (if, for
instance, the tool salesman pulled up in his truck, and you exchanged
a check for $1000 of new tools), then only one transaction is
necessary, but since the business process functions are built around
the more general case of separate expenses and payments, it's actually
easier to just have two transactions that go through Accounts Payable
on the same day.


On Sat, Jan 12, 2013 at 4:44 AM, tereque <tereque at gmail.com> wrote:
> Hi everybody,
>
> I am discovering more and more of the 'business section' which seams to
> offer some really useful tools. But I am still having a little trouble
> mastering them.
> At present I am figthing with a Bill & payment of it against where in the
> end the payments are posted to. Naturally I need a payment that has been
> done (through "process payment" in this case) to be posted to  an asset
> account and on the other side an expenses account of my choice. What I do is
> the following:
>
> I post a Bill to an a/p account
> I pay this bill with 'process payment' from asset account 'cash'
>
> problem: the corresponding account for this transaction from asset account
> 'cash' is still the a/p account
>
> solution: I change the corresponding account to an expenses account the an
> expenses acccount of my choice
>
> new problem: this messes up my Bill vs payment system (the bill is market
> 'due' and not 'paid')
>
> how to get out of this ?
>
> thanks as always
> Bela
> _______________________________________________
> gnucash-user mailing list
> gnucash-user at gnucash.org
> https://lists.gnucash.org/mailman/listinfo/gnucash-user
> -----
> Please remember to CC this list on all your replies.
> You can do this by using Reply-To-List or Reply-All.


More information about the gnucash-user mailing list