Keeping track of small debt between friends, both ways

[Buddha Buck]

On Tue, Aug 4, 2015 at 10:17 AM Pedro Emílio Machado de Brito <
pedroembrito at gmail.com> wrote:

> On Tue, Aug 4, 2015 at 10:47 AM, Buddha Buck <blaisepascal at gmail.com>
> wrote:
> > It's either an Asset or a Liability. Pick one. If you are concerned
> about it
> > sometimes having a negative balance, pick based on what you think the
> > typical balance would be: If you think Bob will owe you more often than
> you
> > will owe Bob, then make it an asset. If you think it's the other way
> around,
> > then make it a Liability.
>
> I'd put it under Assets then, but it doesn't feel right.
>

It's where it goes, or as a Liability. You are just keeping track of it,
and letting it go both positive and negative by small amounts.


>
> Do equity accounts have other uses besides opening balances and
> closing the books (which I never do)?
>

The Fundamental Equation of double-entry bookkeeping is:

  Assets = Liabilities + Equity

In other words, everything you (or the company, or whatever accounting
entity you are working with) have (Assets) is either owed to someone else
(Liabilities) or is owned by the entity owners (Equity). In personal
accounting, "Equity" is often synonymous with "Net Worth".

Income and Expense accounts are really sub-accounts of equity. Income
increases your equity, Expenses decrease your equity. Some folks write the
equation as "Assets = Liability + (Equity+Income-Expenses)" or as
"Assets+Expenses = Liability+Equity+Income" to include all five main
account types (the last has the advantage of reminding you that assets and
expenses are debit accounts, and liabilities, equities, and incomes are
credit accounts), but really income and expenses are subordinate to equity.

"Closing the books" simply moves the accumulated totals of income and
expenses into equity so you can see the balances in them as "current",
rather than "over all time".


>
> > My solution to similar problems is to not worry about it. If I go out to
> > dinner with Bob and pick up the check, it's an expense. Informally, I
> know
> > he'll pick up the check next time to "settle the debt". I don't worry
> that I
> > paid $15 for his dinner, and he paid $12 for mine (so he'd owe me $3).
>
> That was me too, before I started using Gnucash. Now I'm sort of crazy
> paranoid about every cent of my money :(
>
> --
> Pedro Emílio Machado de Brito
>
> Ciência da Computação 2012 - Unicamp
> Coordenador Financeiro - Centro Acadêmico da Computação (CACo)
>