Under what accounting head should this account be created?

Mike or Penny Novack mpnovack at mtdata.com
Tue Jul 14 08:04:58 EDT 2015


so if I create accounts like so, should I only create one account? or 
should I create two accounts for the same person? i.e. one under a/c 
payable and another under a/c receivable? so that if the balance 
switches I start using the other account e.g. if david owes me 50 its in 
the a/c receivable and for instance now I borrow 100 from him cash 100 
............david a/c receivable 50

Stop --- "accounts payable" and "accounts receivable" are only for 
accrual basis accounting and using the business features.

You aren't invoicing this friend and he isn't invoicing you, right? 
These are personal books and cash basis, right?

Maybe an example would help? (when an account switches the side of its 
usual balance).

Let's say you have a credit card. You would have an account for that 
under "liabilities".
a) When you get a statement (or download transactions) the transactions 
are entered (properly, as of the date they took place).
b) When you make a payment, that transaction gets entered.

OK, now if the payment is for less than the balance, that remains a 
credit balance (normal for liabilities). If the payment each month 
totally covers the balance, now shows zero until you have entered more 
transactions (they might have already taken place). But perhaps you are 
on a tight cash flow budget, and what you do is pay the same amount each 
month. Now it is possible for your books to sometimes show a debit 
balance (abnormal for a liability).

Michael D Novack


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