Accounting Help? (GnuCash 2.6.11)

[Mike or Penny Novack]

On 3/9/2016 8:20 PM, Rafael Sánchez Treviño wrote:
> Hi Greg,
>
> OK. I think I understand better now. Do you use Equity accounts? If so, you
> may add one named "Dividends" and then credit it when you get money for you
> from the business (debiting the cash account). Dividends are reductions
> from stockholder's equity, not expenses. I would use that if I have
> retained earnings from past years (or the current one). And if you want,
> you could use the option to invest in your business by "purchasing" stock
> when you are putting money into it. That would be a debit to the cash and
> credit to "common stock" or your equivalent equity account.
a) The reference to "dividends" would be for a public corporation. A 
sole proprietorship would be "owner's draw". I'm not going to even begin 
discussing the closely held corporations which may be allowed to account 
as if sole proprietorships or partnerships.
b) But in the case of loans to the business, you need to check with the 
rules for your jurisdiction. You can treat this as a liability as far as 
gnucash is concerned. But your jurisdiction might consider that an 
increase (or decrease when taken out) of your investment. In other 
words, a loan that has "no standing" with respect to debt owed other 
creditors should things go west.

c) Your confusion with regard to expenses? Both "Income" and "Expense" 
accounts are actually temporary accounts of fundamental type equity. In 
the earliest days of double entry bookkeeping (hundreds of years ago) 
these transaction were immediately entered against equity. That allowed 
net worth to be known at all times but all information about subtotals 
of income and expense categories was lost. Then somebody got the bright 
idea of first entering these into accounts of type "income"and expense" 
and only later transferring the totals to equity (see "close the books").

Michael D Novack

PS: The usual caveat, I do not have the "credentials" to be giving this 
sort of advice and you can't expect anybody else doing gnucash help to 
have those either. We should really only be telling you "how to do with 
gnucash" but not the "what" should you be doing.