GnuCash Income - How to manage?
Mike or Penny Novack
mpnovack at mtdata.com
Mon Jul 13 07:56:50 EDT 2015
"GnuCash, by it's design, makes it difficult to see at a glance which
type of account register you are in. It makes a big difference if you
are using an asset (or liability) account as your base or if you are
using an Income (or expense) account. It is easier to get used to it if
you stick to using asset accounts for cash or checking and liability
accounts for loans or credit cards for the first few months. A
transaction representing purchasing groceries works differently if it is
done in an asset account than if it is done in a liability account,
because the running balances go in opposite directions."
This is EXACTLY what I was talking about.
If those new to double entry bookkeeping are perceiving it this way (as
there being any difference) then perhaps they might try for a bit to ask
gnucash to use the old fashioned labels "debit" and "credit" because
then they will see that there is no difference at all (except for which
account is being used to pay for those groceries.
In EITHER case the transaction will be a debit to groceries and a credit
to (for example) either "cash" or "credit card".
The difference is that because "cash" is on the debit side of the ledger
a credit to is is a decrease while "credit card" is on the credit side
of the ledger so a credit to it an increase.
And it isn't just for a few months! There are just three fundamental
types of "standing accounts" (permanent accounts). Those of type "asset"
(normal balance is on the debit side), those of type "liability" (normal
balance on credit side), and those of type "equity" (normal balance on
credit side). The accounts of type "income" and "expense" are TEMPORARY
accounts of fundamental type "equity". In traditional bookkeeping, at
the end of the accounting, they would have been closed to equity via the
also temporary equity account "profit and loss" and then that closed to
equity by a transaction for the net gain or loss for the period.
Like with most modern computerized accounting packages, with gnucash you
don't have to do an actual "close the books" process in order to produce
the reports as if you did.
Michael D Novack
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