Handling Purchase Advances

[Buddha Buck]

The other folks have the right idea: record the transactions as they occur.
 I just disagree with them as to how they should be recorded.

You are incorrect that the transactions have no impact on your finances.
 At the end of the day, your bank account is $100 greater, and your wallet
is $100 lesser.

Here's how I'd record them:

1. My friend gives me $100 to buy an item.  He deposits the amount in my
bank.

Debit $100 to Assets:Checking
Credit $100 to Liabilities:My Friend  (or some similar liability account)

Your friend is giving you $100 in the expectation that it (or equal value)
will be returned.  Until that is done, you owe him $100; that's a liability.

2. I already have $100 in my wallet, so buy the item for $89 from my
wallet.  So balance $100 is to be paid back to my friend.

Debit $89 to Liabilities:My Friend
Credit $89 to Assets:Wallet

This recording assumes that the item immediately goes into the possession
of your friend, and thus can cancel the debt immediately.  Practically,
that's probably not the case, and you are holding on to the item until you
meet your friend.  In which case, an alternative choice would be:

Debit $89 to Assets:Miscellaneous (or some other appropriate asset account)
Credit $89 to Assets:Wallet

3. When we meet, I return $11 in cash to him from my wallet.

Debit $11 to Liabilities: My Friend
Credit $11 to Assets:Wallet

If you recorded the item you bought for your friend as an asset, and you
gave it to him when you gave him the $11, that would be:

Debit $100 to Liabilities: My Friend
Credit $89 to Assets:Miscellaneous
Credit $11 to Assets: Wallet

If you look over the set of transactions listed above, the net result is a
$100 debit to Assets:Checking, and a (combined) $100 credit to
Assets:Wallet.  Every other account has balanced debits and credits, no
income, expense, or equity accounts were involved, and Liability accounts
were used to represent money/things you owed to others while Asset accounts
were used to represent money/things you possessed.



On Thu, Jun 20, 2013 at 6:16 AM, Sanjay Chakravarty
<sanjaychak02 at gmail.com>wrote:

> Dear All,
>
>
>
> Here is a scenario I want to record in gnucash but I don't know how.
>
> 1. My friend gives me $100 to buy an item. He deposits the amount in my
> bank.
> 2. I already have $100 in my wallet, so buy the item for $89 from my
> wallet.
> So balance $11 is to be paid back to my friend.
> 3. When we meet, I return $11 in cash to him from my wallet.
>
> Usually I use Assets::Reimbursements when purchases are made in advance for
> someone (like official), and I get reimbursed exact amount. Here, an
> advance
> is being made, and that too into the bank. How do I setup the above 3
> transactions in gnucash?
>
>
>
> Regards
> Sanjay
>
>
>
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