How difficult is it (really) to reorganize a Chart-of-Accounts after the fact?

Mike or Penny Novack stepbystepfarm at mtdata.com
Fri Jan 2 15:55:24 EST 2015


On 1/1/2015 11:14 PM, Patrick Doyle wrote:

I would _not_ have any Income nor Expense accounts.  (I realize this
is heretical, but bear with me before you cast me out into the
darkness where there will be wailing and gnashing of teeth).

I would not cast you into the outer darkness, nor insist you don't use gnucash any way you want (after all, I do some weird, nonstandard things with subsidiary books), but did you read and try to understand my description of the history of double entry? Did you get that "income" and "expense" type accounts are actually of fundamental type "equity"? Do you understand that debits and credits are opposite of sense (sign, there being no negative numbers).

Shall I try again? Accounts we term "income" are accounts of type "income or expense" and that's actually "equity". Same with accounts of type "expense". An "income" account is an account of type "income or expense" whose balance is usually on the credit side and an "expense" account is an account of type "income or expense" whose balance is usually on the debit side. In other words, an account of type income which instead had a debit balance would be recording expenses and an account of type "expense" which instead had a credit balance would be recording income items.



On payday, I would put in the following transaction:

2015-01-01 Wages
     Debit Assets:Checking $200
     Credit Equity:Food $100
     Credit Equity:Books $50
     Credit Equity:Gas $50

A quick check of my accounts summary screen would show that I have a
balance of $100 in Equity:Food, etc.

When I buy groceries, I would put in the following transaction:
2015-01-02 Weekly Groceries
     Debit Equity:Food $87.50
     Credit Assets:Checking $87.50

Stop! To do this slightly more standard, Choose one of "income" or "Expense" to use for "Income or expenses". Let's say you chose "expenses" (since that seems to be what you care about). Your 2105-01-01 transaction now looks like
2015-01-01 Wages
     Debit Assets:Checking $200
     Credit Expense:Food $100
     Credit Expense:Books $50
     Credit Expense:Gas $50
In more standard terms, you have established "reserves" for those expenses. Those were NOT expenses since on the credit side of the ledger. You now buy groceries.

2015-01-02 Weekly Groceries
     Debit Expenses:Food $87.50
     Credit Assets:Checking $87.50

I think you should see that not really going to be all that much different than what you are doing, but wait. You have lost categorizing income items. Let's see if a slight modification can fix that.

Assume you were using the standard set up (both income and expense). Under Income as a parent you have wag allocated and wages unallocated. You get a paycheck.

2015-01-01 Wages
     Debit Assets:Checking $200
     Credit Income:Wages Unallocated $200

You want to place that amount into expense reserves.
      
2015-01-01 Reserve to cover expenses
     Debit Income:Wages Allocated $200
     Credit Expense:Food $100
     Credit Expense:Books $50
     Credit Expense:Gas $50

That could of course have been entered as a single split transactions, but transactions split on both sides aren't, in my opinion, for beginners.

What have you gained? Well now, if you want, you get to see all your wage transactions, can see the total of all your wages, etc. It's what I was describing in the history, why they abandoned immediately recording transactions against equity as they came in.

Michael D Novack


  



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