Can Gnucash Be Used As Single Entry?

[JL Marcos ENDO]

This is an impressive and helpful amount of information, DaveC49. I 
appreciate very much that you took the time to help me.
It will take me a couple of more reads to understand the main points.

For now, I'd like to ask you these two questions:

you said in your second paragraph:
> if a business or entity has a large number of transactions
my business is 1 income transaction a month and about 40 expense transaction 
a year total that I pay immediately as soon as they are due, with no loans 
or mortgages or inventory; credit card balance is paid off as soon as 
statement is ready

Q1. would you say it'd be safe to bookkeep my business with the single-entry 
method if I continue to find double-entry daunting (and unintuitive)?

Q2. I was all along thinking I'd use the "cash method" of accounting 
(instead of the "accrual method") for IRS purposes:
are the cash method and double-entry accounting compatible? (I realize that, 
for all I know, the two may be total opposites, and that this question 
itself reveals how much I still do not know ;-)

Thank you very much again,

JL Marcos

-----Original Message----- 
From: DaveC49
Sent: Sunday, 24 January, 2016 17:01
To: gnucash-user at gnucash.org
Subject: RE: Can Gnucash Be Used As Single Entry?

Hi JL Marcos,

You can think of double entry accounting as a generalisation of your
spreadsheet system. In your single spreadsheet which is presumably for your
bank account and/or credit card you are specifying the source account which
in your spreadsheet is fixed at one of the above. You are also specifying
the destination account ( the category of expenditure). In your spreadsheet
if you want to know how much you spent on a particular category of
expenditure, you would have to find all entries with that category as the
destination and sum up the totals.

Accountants are basically lazy and this is too much trouble if a business or
entity has a large number of transactions so they derived a procedure in
which an "account" is maintained for each source of funds for expenditure
and an "account" is maintained for each category of expenditure.

When you spend money on an item, the transaction then consists of recording
that you have taken money from a source of funds ( asset - bank account  or
a liability-credit card) and that you have spent the money on a particular
category of expenditure. In the days of paper and pencil books a separate
book was kept for each "account" and a corresponding entry was made in each
book (hence double entry).  The running total of the amount in each book is
the balance of the account.

Bookkeepers also manually maintained a third book called a journal which
cross referenced the entries in the separate "account" books allowing the
corresponding entries to be easily found .

Money coming into a business is income and a separate set of income accounts
also cross referenced to the "bank accounts" are used to record income from
one or more sources. Again an increase in the bank account is recorded in
the "bank account" book and a corresponding entry is recorded in the income
account book.

Why do all this? Anyone operating a business needs to know what money they
have coming in, what they have available to spend, and where they have spent
money in order to decide whether their allocation of resources is
appropriate (generally in terms of whether they have increased profit or at
worst decreased their loss).

You also need to know how much of the business is yours - hence equity
accounts - and how much is the bank's (or other creditors) - hence liability
accounts. They also need to know that their records are correct, especially
when the tax man is involved as in past times they sometimes literally took
an arm and a leg if they weren't.

A business or person also needs to know this on a regular basis so they can
judge how they are going at any point in time. This introduces the concept
of an accounting period ( which may commonly be weekly, fortnightly,
monthly, quarterly, semiannually or annually). Income and expenses are
regarded as extensions of the business owners equity as their difference is
the increase or decrease in the owners equity and they are normally regarded
as temporary accounts for the accounting period and at the end of the period
their difference is transferred to equity as a profit or loss, the income
and expense account balances are zeroed and the process is repeated for the
next accounting period.

Asset, Liability and Equity accounts record the ongoing resources of the
business and can include land , equipment and property as well as bank
accounts and credit cards.

the structure of your accounts reflects the amount of detail in which you
need to be able to understand your business or personal expenditure.

GnuCash computerizes this process, implements "accounts' as registers and
transactions as coupled entries to two or more registers just as described
above. You will find these coupled entries in the registers described as
splits in discussions of GnuCash.

When you open an account tab in GnuCash normally only the entry affecting
the account displayed is shown in the list of transactions affecting that
account but if you click on the line, it will open to display the
corresponding entry affecting another account or accounts as well as the
entry affecting the account you are displaying (the split of the
transaction).

The process of debits and credits to accounts appears quite arcane to the
uninitiated so I will not address its complexities here.

The advantages of double entry accounting and of GnuCash in particular is
that it usually makes an error fairly obvious as there are rules about how
the splits of a transaction behave (primarily the debits and credits of a
transaction must sum to 0). Secondly it embodies the general principles of
accounting implemented in most national and international standards and is
sufficiently flexible that it can be adapted for most general accounting
functions. Information you generally need about your expenditure is readily
accessible using the available reports and if they don't suit they can be
customized.The major con is as with any computer system you have to invest
some time to familiarize yourself with how it operates.

Most of the above is addressed fairly well in the Wikipedia entries on
Accounting which are reasonably well referenced to the professional
accounting literature and explain the accounting jargon fairly simply. I
hope the above is of help in introducing enough of the accounting
lingo/jargon as that is usually the first barrier to understanding in any
field.









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