How should I record outstanding expenses in GnuCash?

[absconditus absconditus]

Hi David,

Thanks for your reply.

1. I found the way Kevin described better than using Opening Equity
for outstanding charges because his does not bypass Expense accounts.
I am not sure which one you are suggesting I use.

2. "Your "TEST" opening balance had to have come from somewhere"

The problem is it is not yet a realised transaction. Furthermore, I
cannot record it as a future transaction because I do not know when I
will be able to make the payment.


On Sun, Sep 7, 2014 at 6:42 PM, David Britton <bbaruu at gmail.com> wrote:
> Your "TEST" opening balance had to have come from somewhere -- Debits equal
> Credits.  There had to be some offsetting acivity in the form of a Debit
> either to an Expense account or to Equity as the result of a prior year's
> transaction (the Books having closed on some Expense incurred back then.)
> You should comprehend two accounts with opening balances, one detailed, one
> implicit.  Activity should flow through the Income Statement, either
> currently or have done so in the past (ie last year's Income Statement
> expense  now reflected in the opening balance of this year's Equity.)
>
> -----Original Message-----
> From: gnucash-user
> [mailto:gnucash-user-bounces+bbaruu=gmail.com at gnucash.org] On Behalf Of
> absconditus absconditus
> Sent: Sun, 07 Sep, 2014 11:26 AM
> To: gnucash-user at gnucash.org; kpreid at switchb.org
> Subject: Re: How should I record outstanding expenses in GnuCash?
>
> Thanks a bunch Kevin. This seems to work. Would this be an accurate
> representation of the above transactions?
>
> If Assets - Liabilities = Equity + Income - Expenses
>
>     10 - 5 = 5 + 0 - 0
>
> then
>
> A) On the day the bill is due:
>
>   10 - (5+3) = 5 + 0 - (0+3)
>
>   10 - 8 = 5 + 0 - 3
>
> B) On the day the bill is paid
>
>   (10-3) - (8-3) = 5 + 0 - (0+3)
>
> If the above is true, would not transaction B contradict the following rule:
>
> "The two Income and Expense Accounts are used to increase or decrease the
> value of your accounts. Thus, while the balance sheet accounts simply track
> the value of the things you own or owe, income and expense accounts allow
> you to change the value of these accounts."
> http://www.gnucash.org/docs/v2.4/C/gnucash-guide/accts-concepts1.html#accts-
> bsa2
>
> This on the grounds that we are changing both Balance Sheet Accounts without
> using Income and Expense accounts.
>
> I am trying to understand what is taking place, as opposed to simply being
> able to repeat it.
>
> PS I apologise if anyone receives the email twice. New to mailing lists.
>
> On Sun, Sep 7, 2014 at 5:56 PM, Kevin Reid <kpreid at switchb.org> wrote:
>> On Sep 7, 2014, at 7:22, absconditus absconditus <absconditus87 at gmail.com>
> wrote:
>>
>>> By 'outstanding expenses,' I mean bills that are due but that you
>>> cannot, at present, pay. Nor do you know exactly when in the future
>>> you would be able to pay.
>>>
>>> Here's what I've experimented with:
>>>
>>> I have created a new liability account ('TEST') with an opening
>>> balance equal to the amount of the bill. I dated this initial
>>> transaction to when I was supposed to pay the bill.
>>>
>>> So far so good. Recording the bill's payment is what I find difficult.
>>> To record the transaction, I have credited the 'Cash in Wallet'
>>> account, and debited the 'TEST' account.
>>>
>>> The problem is this bypasses the 'Expense' account. Ideally, I would
>>> like for the bill-payment transaction to show as an expense.
>>
>> You should record what you're calling the "opening balance" of the
> liability account as being from the expense account (as opposed to
> Equity:Opening Balances). This will make everything work out.
>>
>> By choosing to enter the bill as a liability, you're, shall we say,
>> acknowledging it exists for accounting purposes, and expenses go into
>> Expenses at the date you acknowledge they exist, not the date you pay
>> them. (Compare this to credit card transactions, which are essentially
>> the same thing: you enter them as expenses on the date you got the
>> liability -- you used the card -- not the date you pay your credit
>> card bill.)
>>
>> When the bill is due, you enter this transaction:
>> Expenses:That Bill     +$X
>> Liabilities:That Bill  -$X
>>
>> When the bill is paid, you enter this transaction:
>> Liabilities:That Bill  +$X
>> Assets:Cash in Wallet  -$X
>>
>>
>> Disclaimers: I am not an accountant. Terminology may be wrong. Advice may
> be bad.
>>
>>
>> --
>> Kevin Reid                                  <http://switchb.org/kpreid/>
>>
>
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