Creative accounting

[Kim C. Callis]

On Tue  1Oct13 @ 10:13-0400, Ian Konen wrote:
> On Tue, Oct 1, 2013 at 6:18 AM, Kim C. Callis <kim.callis at gmail.com> wrote:
> > After a long hiatus, I have decided to start using GnuCash for both
> > business and personal use. As I was setting things up, I realized that
> > I had a recent invoice that I needed to submit. I am doing work at
> > clients hotel, and he is charging me rent for one of his room (Yes, a
> > crappy deal, but it discounted).
> >
> > So I get ready to send out my invoice and it makes is way to accounts
> > receivable.
> 
> Are you running your own business and creating invoices with GnuCash,
> or are you an employee / subcontractor and submiting a work log to an
> actual accounts receivable department or person?  This sentence sounds
> like the latter, and if so, I think they should probably answer most
> of the rest of your questions about how to credit the account for the
> rent you owe the client and whether it should be part of the bill or a
> separate entry entirely.

I am running my own consulting business and once upon a time, I
actually dropped everything off with my bookkeeper. Ah, the days of
yesteryear! Now I am trying to do do everything in an attempt to
minimize.

> 
> Assuming you're doing everything in GnuCash, there's no magic, but just:
> 
> 1.  Create the rent expense account by going to the main accounts tab
> and selecting Actions->New Account and make sure it is a subaccount of
> "expenses".  I am not an accountant, but I would definitely advise a
> separate business rent account from personal rents (your house in a
> warm climate).  Assuming you frequently travel to client sites and
> usually pay for a hotel out of pocket, that's going to a be a normal
> cost of you doing business, and I think most people put that under
> Expenses:Travel, but whatever you want to call it, you really want to
> keep business and personal expenses separate.  The only thing unusual
> here is you can skip the involvement of a credit card account (one
> presumes you would usually use to pay for a hotel).
> 
> 2.  If the value of the rent is to be applied directly to accounts
> receivable, it's a standard, simple transaction: for $100 rent, credit
> the accounts recievable $100 and debit the expense account $100.  No
> funny money: the value is in the rental stay.  If you're doing
> invoices, though:
> 
> The client charged me rent, so I want to apply that rent
> > to accounts receivable to reduce the total invoice. Since I already
> > have a house that rent in a warmer clime, I am curious on what magic
> > do I have to do so that setup a rent expense, plug in the money that
> > would have been give for rent and apply it to accounts receivable
> > against the client bill?
> >
> > Or would it be easier to just add the rent amount directly to the
> > invoice to reduce the invoice price? The problem that I have there is
> > that there is no clear tracking of the rent expense at the client site
> > (because this is all funny money, meaning that it is not coming from
> > an asset account). I realize that I can't do it as a accounts payable,
> > since again, it is not real money, but the appearance of cost.
> 
> I really wouldn't call it "not real money" or "funny money".  If
> you've agreed to the value of the rent and the value of your work it's
> perfectly legitimate to have those cancel rather than standing in
> person handing the same wad of cash back and forth while you tick off
> who owes what.  I'd say the entire point of using an accounting system
> is for complicated situations like this.

You are entirely correct, beccause even if I decided to exchanges
rocks for my service, the rocks become currenancy. So I was incorrect
in saying "funny money".

> 3.  If you're using GnuCash's business features and generating
> invoices, I'm not actually sure what the best way to itemize that
> rent, but I think you can show it on the invoice directly as a line
> item with a negative cost, or you can leave it off but apply it as a
> partial payment towards paying the invoice.

I think what I am really trying to understand is how to apply the rent
to the accounts receivable, but after reading you remarks, I believe
that I have it. I can create an expense account called WO Rents. I
then credit the AR:Waterville Oaks with payment from WO Rents, which
is turn will reduce the amount owed by AR: Waterville Oaks.

I guess my confusion comes over adding to Expense:WO Rents? I am not
paying the owner any money upfront. It is only after I have finished a
period of the project that is at time billable, do I have to offset my
bill with the rent owned to the owner. So in a sense, I guess it would
be me setting up a AP:WO which I then plug in his rate for the room.

Thanks for the pointers, I think I need to go to get this working for
me...

Kim Callis
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