Establishing a new line of credit account...

[Michael Hendry]

On 18 Sep 2014, at 17:06, Ken G. <beachkidken at gmail.com> wrote:

> I have been using GnuCash for several years now and now I have a problem. How do I establish a new line of credit account of $500? Is it an asset for $500 and a liability for zero cents? When I purchased something say for $5, would I deduct $5 from my asset account showing a balance of $495 and a liability for $5? I would assume I would start with an opening balance of $500 debit and $500 credit to Equity account.

I’ve never had occasion to use a line of credit, and am not quite sure what it entails.

My current (equivalent to US checking) account is set up to allow me to overdraw up to a limit without the need to arrange an overdraft - simply paying the interest on the sum borrowed from time to time. In this situation, my “line of credit” would appear as a negative balance in my current account, and I wouldn’t need to make any special arrangement for it.

Is this the situation you’re in? Or do you have a separate account which is used for the loan? If the latter, it could be treated as if it were a current account, but one whose balance never rises above zero.

Perhaps I’m not understanding what you’re trying to achieve here.

> 
> Thanking you in advance for your help and suggestion. Gosh, it has been 54 years since I had my high school bookkeeping class.

Michael

(who never had a book-keeping class…)