Multiple category entries

[John Ralls]

On Mar 16, 2014, at 1:55 PM, David Therkelsen <david at therkelsen.us> wrote:

> I am a newbie with respect to accounting software, although once, very long
> ago (more than 2 decades) I earned a minor degree in accounting.  Sigh.
> 
> I have started with GnuCash's basic accounts, and made a few minor changes.
> 
> In a business I have started, I have purchased a computer at a cost of $500. 
> I have credited my 'Checking Account' asset for that amount, lessening its
> value by $500.  I have debited an asset account called 'Equipment Assets',
> increasing its value by $500.  So far, so good.
> 
> I also need to show the computer purchase as an expense of $500.  I have
> debited an expense account called 'Computer' for this amount.  In the
> 'Transfer' column of this transaction, my first response was to debit the
> same 'Equipment Assets' account as above, but of course that results in two
> $500 dollar entries to that account, making it look as though I made two
> purchases and have $1000 in assets.
> 
> Looking at the language, it seems that I need to credit an expense account
> to balance this transaction, but that doesn't make sense.
> 
> Certainly I'm making a bad assumption in what I have done here, but I don't
> know what it is.
> 
> Please help an old guy.

You've forgotten that the purchase of a capital asset isn't an expense, it's a conversion of the asset type. In this case it's from "cash" to "equipment". You amortize the cost over time via depreciation.

Regards,
John Ralls