How should I record outstanding expenses in GnuCash?

Sun Sep 7 13:40:35 EDT 2014

Thank you David. Much obliged.

On Sun, Sep 7, 2014 at 7:30 PM, David Britton <bbaruu at gmail.com> wrote:
> I don't suggest that you bypass Expense at all -- in fact, I show you that that is what must happen, either in the present where the transaction is balanced with an entry to an Income Statement expense account or in the past to achieve an opening balance elsewhere.  Your "TEST" amount can be one of two things; it can be one side (the Credit) of the initiating transaction, or it can be truly an Opening Balance in which case the other side of the transaction has to appear in some other  opening balance, Equity.  It's not a case of using opening Equity; it's a case of whether or not the entry is significant enough to require re-statement of prior years by displaying an adjusting entry to Equity (which effect can only normally come through the Income Statement) that impacts the Statement of Retained Earnings.
>
> Accounting is fundamentally transaction based.  That is, events in the real world have transpired so as to necessitate recording a transaction.  Sometimes events are so likely to happen and of such consequence that because of the conservative nature of accounting, we need to record them regardless of whether they've occurred (like a serious suit, damage from disaster); so not everything needs to be realized.  But booking something as a Liability inherently deals with the timing issue; it can be dealt with whenever but we have incorporated the effect already.  Whether, or even if, you are able to pay, does not affect the record -- the Liability remains until discharged.
>
> -----Original Message-----
> From: absconditus absconditus [mailto:absconditus87 at gmail.com]
> Sent: Sun, 07 Sep, 2014 11:55 AM
> To: David Britton; gnucash-user at gnucash.org; Kevin Reid
> Subject: Re: How should I record outstanding expenses in GnuCash?
>
> 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/>
>>>
>>
>> _______________________________________________
>> gnucash-user mailing list
>> gnucash-user at gnucash.org
>> https://lists.gnucash.org/mailman/listinfo/gnucash-user
>> -----
>> Please remember to CC this list on all your replies.
>> You can do this by using Reply-To-List or Reply-All.
>>
>