Split transaction and VAT

[Mike or Penny Novack]

On 10/21/2015 6:09 PM, John Whitmore wrote:
> I'll start by saying that I'm easily confused by how finnance is delt with so
> don't take it badly that I'm struggling with the GnuCash Tutorial document.
>
> I've been practicing with GnuCash on my personal finances all year as a
> prelude to running my own small company. Now I'm at the point where I'm trying
> to add my first transaction to my company acconts. Now I have to use splits!
>
> Say I've been paid 1,230 of which 230 is VAT (Value Added Tax) which at some
> point has to be paid to the government. All this is coming from Company_A.
>

I've said this before. You can't make good use of gnucash (or any other 
application) until you understand the fundamentals of double entry 
bookkeeping. Now maybe the tutorial provided along with gnucash is 
enough for some people to get it. But for others probably not. And the 
blame shouldn't be placed on the gnucash team for "inadequate tutorial" 
because their job is to create the package, not teach "bookkeeping 101".

I won't repeat what you were doing. I will just describe the transaction 
you say you were trying to enter. First the facts. You received a check 
(or other form of payment) from company A, part of which was payment to 
you for some good or service and part payment of the VAT due on this 
(which you later pay to the government or charge against VAT payments 
you made to suppliers, etc.). So yes this is a split, BUT:

Assets:Current Account     db       1,230
     Income: From A                                cr        1000
     Liabilities: Vat owed                         cr           230

a) I am using the old fashioned debit and credit notation so as not to 
involve the supposedly more user friendly alternatives increase and 
decrease. The latter change their meaning depending if the account is 
normally debit balance vs credit balance.

b) Until you are experienced entering splits, always start in the 
account with the largest amount. And stick to one sided splits until you 
are very experienced entering splits.

Michael D Novack, FLMI