Beginners question, confused between real bank accounts and gnucash accounts

[Larry Evans]

On 03/29/2016 07:06 AM, Buddha Buck wrote:
> On Mon, Mar 28, 2016 at 8:46 PM Larry Evans <cppljevans at suddenlink.net>
> wrote:
>
>> It's a bit of a hassle to maintain 2 accounts (asset and
>> income), for what should be 1 "entity", my investment
>> accounts.  For each of these paired asset-income accounts, I
>> try to make sure they have names which makes it easy to see
>> the correspondence, and that's one of the hassles.
>>
>> However, I wondering why gnucash couldn't be redesigned so
>> that an account, say for an entity named "TaxFreeBondXXX",
>> be *both* an asset *and* an income account, or, for that
>> matter, an expense account (to, for example, record
>> commissions paid to my broker).  It seems that would make
>> things easier for people like Ed and I.
>>
>
> Fundamentally, assets and income are very different things, which is why
> they are tracked in different types of accounts. Assets are things you
own,
> incomes are increases is your net worth. Asset accounts have a
> "debit-balance", meaning that debits to the account increases its balance;
> while income accounts have a "credit-balance", meaning that credits to the
> account increase its balance. When you receive income and put it into an
> asset account (like receiving a wage check and depositing it in your bank)
> you debit the asset account and credit the income account. I do not
see how
> that would be possible, or even what it would mean, to have an account
that
> is both an asset and an income account.
>
> Looking at the situation of having a mutual fund which generates income,
> the mutual fund is your asset, and the incomes change the value of that
> asset. They record, when the value of the mutual fund goes up, where that
> extra money comes from.
>
> Unless I had a compelling reason to keep closer track of income/expenses
> coming solely from the investment account, I would probably just have an
> "investment income" account, an "investment expenses" account and record
> account statements like so:
>
> 1/1/2016 Receive statement from Vanguard
> Assets:Investments:VanguardIndex debit $993
> Expenses:Investments:ManagementFees $debit $7
> Income:Investment:Dividends credit $800
> Income:Investment:CapitalGains credit $200
>
> 1/6/2016 Sell off 100 shares of APPL at $100.00/share
> Assets:Checking Account: debit $9985
> Expenses:BrokerageFees: debit $15
> Assets:Investments:Apple credit $8043.23
> Income:Investment:CapitalGains credit $1956.77
>

I see I was very unclear.  I should have said make the Asset
and Income accounts subaccounts of the, in your example
above, a VanguardIndex account.  That way, it would be easy
to see the incomes and expenses for your VanguardIndex
asset.  In contrast, the way gnucash is currently
structured, one has to create, (if one has a "compelling
reason") a [VanguardIndex Asset] account, a [VanguardIndex
Income] account, and a [VanguardIndex Expense] account, and
make sure the names of those Asset, Income, and Expense
accounts are similar enough to indicate the connection.
I've found that a bit of a hassle.

I've also seen other posts to this newsgroup about
separating personal from business accounts.  IIRC, somebody
had a personal business and he was paying himself a salary
from that business.  I would guess that this would be more
straightforward if he had something like [Personal Income],
[Personal Expense] and [Business Income] and [Business
Expense].  So, again, why not just have a [Business]
"entity" with [Income] and [Expense] accounts, and a
[Personal] "entity" with similar accounts.  Then it would be
easy to see that [Business.Expense.salary] has a
corresponding entry in [Personal.Income.salary].  But it
would require the "entity" to have both Income and Expense
accounts, but gnucash only groups Income and Expenses under
a single "entity", the current gnucash file.

I hope that makes things clearer.