Accounts structure for a worker cooperative (read: partnership) with expense accounts

[David Cousens]

Ben,

Since you started the business with no financial input from your 
members/partners, the inital equity is zero. I f you had contributed 
funds to the business, the deposit of the funds in the co-ops bank 
account (a debit) would be matched by a corresponding increase(credit) 
to an equity account by the same amount. For multiple partners 
contributing you would set up an equity account for each partner to 
track each partners contributions to equity, particularly if not an 
equal partnership. (The terms in brackets here are the accounting names 
for the type of transactions).

Your sales will occur with a deposit to your bank account (debit) and a 
corresponding increase (credit) to an income account. If necessary you 
could track the income each partner generates in a separate income 
account. Similarly expenses are recorded by a decrease in your bank 
account(credit) and a corresponding increase in the appropriate expense 
account (debit).

At the end of your financial reporting period (usually annually but can 
be monthly, quarterly, or semi-annually), the temporary income and 
expense accounts are "closed" usually to another temporary account known 
as an income summary account. This is done normally by decreasing 
(debit) the income accounts by their balance at the date of closing and 
increasing (credit) the income summary account by the amount of the 
balances. Your expense accounts are similarly closed to the income 
summary account by decreasing (credit) the expense accounts by the 
amount of their final balances and decreasing (debit) the income summary 
account by the amounts of the final balances of the expense at the 
closing date. At this point your income summary account balance contains 
your raw profit/loss for the period and your income and expense accounts 
should all have zero balances ready for the next financial reporting period.

If you are subject to company tax or similar provisions on your profits, 
you would have to apply  the relevant Tax transactions to account for 
this at this point. How is very jurisdiction dependent so you may need 
to consult a tax accountant if necessary.

The final step is to close the residual profit/loss in your income 
summary account to equity. If the income summary account is positive , 
i.e. you have made a profit, you would debit the income summary account 
by the amount of the balance and credit it to an equity account, 
reducing the income summary account balance to zero. Similarly if you 
made a loss, the income summary account would be credited by the amount 
of the loss and the equity account debited.

  An accountant would normally create a temporary equity account to 
receive the profit/loss and then depending upon the distribution 
arrangements in your co-op/partnership agreement distribute them to the 
members individual equity accounts . The business may also retain some 
of the earnings for reinvestment in the business.

When members draw money from the business, their equity account is 
decreased (a debit) by the amount they draw and the bank account is 
decreased (credit) by the amount they draw out of the business.

You will notice that credit and debit  in accounting do not have the 
usual connotation of a respective  increase and decrease in the amount 
of an account.

Whether a credit or debit is an increase or decrease in the balance 
depends upon the type of account:
     Asset (debit = increase, credit=decrease);
     Liability (credit=increase, debit=decrease);
     Equity (credit=increase, debit = decrease);
     Income (credit=increase, debit= decrease);
     Expense (debit=increase, credit = decrease);

This is consistent with the general relationship between the overall 
balances of accounts that
     Assets = Liabilities+Equity +(Income - Expense). Each transaction 
in double entry accounting consists of a debit to one or more accounts 
of one type and a credit to one or more accounts of another type where 
the total of the debits is equal to the total of the credits in the 
transaction.

Sorry for the longwindedness of this post but your question seemed to be 
more about the accounting process than actual Gnucash operations 
necessary to achieve that. Hope this helps>
-- 
*David Cousens*