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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