Profit and loss/Cash Flow reporting question

Wed May 31 16:33:56 EDT 2017

On Wed, May 31, 2017 at 4:13 PM Martijn Heuts <usadutchies at bellsouth.net>
wrote:

> Good afternoon and thank you for your answer.So I understand now that the
> cash flow report and P&L can be different and you explained why.
> I owe a business loan to the previous owner (owner financed). I made a
> payment to her and I was thinking this should be an expense? So right now
> it does show in the cash flow report but not in the P&L report.
> This is how I build up GNU cash:March: Business Purchase: Loan (stock
> purchase)  $xxxx   (in EQUITY)April: Payment 1- business loan $xxx
>  (comes off in Assets: Checking account)
> Did I make a mistake in the way I build GNU or is a business loan not an
> expense?Thanks for clearing this up.
>

My recommendation would be to talk to an accountant who is familiar with
the rules of your jurisdiction for advice on how to set up your accounts
and how certain transactions should be recorded. No one here on this list
qualify as appropriate sources for professional advice.

Generally, loans are not expenses. They are liabilities. Liabilities are
things owed to outside parties, be it money, prepaid goods and services, or
similar. A business loan represents money you owe to someone else, so it's
a liability.

Your equity is the difference between your assets and your liabilities, and
paying back a loan both decreases your assets and liabilities by the same
amount, so does not change your equity, as the difference remains the same.

Expenses are things which lower your equity or net worth, like paying rent
or buying food for the office holiday party. Income are things which
increase your equity, like selling goods for profit or services. The
"profit and loss" statement is designed to show your expenses and income,
and the bottom line is the change in your equity.

If your loan repayment includes interest on the loan, then that interest is
an expense, and needs to be recorded as such. I would suggest talking to a
local accountant to see how to do so.

> Martijn Heuts
>
>
>       From: "gnucash-user-request at gnucash.org" <
> gnucash-user-request at gnucash.org>
>  To: gnucash-user at gnucash.org
>  Sent: Wednesday, May 31, 2017 12:00 PM
>  Subject: gnucash-user Digest, Vol 170, Issue 63
>
> Message: 6
> Date: Tue, 30 May 2017 20:38:00 +0000 (UTC)
> From: Martijn Heuts <usadutchies at bellsouth.net>
> To: "gnucash-user at gnucash.org" <gnucash-user at gnucash.org>
> Subject: Profit and loss/Cash Flow reporting question
> Message-ID: <332873012.2875709.1496176680598 at mail.yahoo.com>
> Content-Type: text/plain; charset=UTF-8
>
>  Hello,
> I am trying to understand the reporting part and trying to figure out my
> net profit. First I pull up my monthly "Cash Flow" report which shows all
> incoming money into my bank account andit shows all expenses?taking out of
> my bank account (assets).
> Then there is the?Income and Expenses?report.? This?report?shows "Income"
> which doesn't add up to the actual income, so I assume it's "Charges"
> instead, right? (I?had some?client's only paying half their balance at the
> time of the order).Then?it shows expenses?which seem to be all actual
> expenses, BESIDES some expenses from a liability account.
> Let me explain:I just bought?this business a few months ago?and because of
> circumstances I could not order?a product directly from a particular vendor
> as my new account was not setup yet. Instead (with the previous owner's
> permission) I ordered it through the previous owner's old account. This
> became a liability?account in GNU?Cash for me. So the expenses I had?for
> the product I put?in to a?liability account as I needed to pay the owner
> back (instead of the vendor).
> Now in the?Cash Flow report this expense shows up, as I paid her via a
> check which came off my debit account (asset)But in the Income and Expenses
> report this?expense does not show up (probably because I can't mark this as
> an expense and liability at the same time).
> So with all this said I am trying to figure out my profit as the Cash Flow
> expenses are different than the Income and Expenses report.
> I hope I am making some sense. I appreciate any help you can
> provide.Thanks and have a great day!
> Martijn
> ???
>
> ------------------------------
>
> Message: 7
> Date: Tue, 30 May 2017 18:09:12 -0400
> From: Mike or Penny Novack <stepbystepfarm at dialup4less.com>
> To: gnucash-user at gnucash.org
> Subject: Re: Profit and loss/Cash Flow reporting question
> Message-ID: <592DED88.5040709 at dialup4less.com>
> Content-Type: text/plain; charset=UTF-8; format=flowed
>
> On 5/30/2017 4:38 PM, Martijn Heuts wrote:
> >  Hello,
> > I am trying to understand the reporting part and trying to figure out my
> net profit. First I pull up my monthly "Cash Flow" report which shows all
> incoming money into my bank account andit shows all expenses taking out of
> my bank account (assets).
> > Then there is the Income and Expenses report.  This report shows
> "Income" which doesn't add up to the actual income, so I assume it's
> "Charges" instead, right?
> Stop right there.
>
> I think you are confusing what a "cash flow" report is supposed to show
> (flow of cash) and what an "income statement" (aka P&L) is supposed to
> show.
>
> Your example indicates the confusion.
> a) You paid an expense by assuming a liability.
>     That would show in P&L but NOT in cash flow
> b) You late paid off this liability
>     That would show in cash flow but NOT in P&L
>
> BOTH of these reports can be important for a business for different
> reasons.  Business can be fine in terms of P&L (it's making a profit)
> but might not have cash on hand when needed. Or a business might be fine
> in terms of cash flow but facing long term troubles because losing money.
>
> To see your net profit, use the "Income Statement" (aka: Profit and Loss
> aka Statement of Revenues and Expenses)
>
> Michael D Novack
>
>
> ------------------------------
>
> Message: 8
> Date: Tue, 30 May 2017 15:41:42 -0700
> From: John Ralls <jralls at ceridwen.us>
> To: Derek Atkins <warlord at mit.edu>
> Cc: "Fross, Michael" <michael at fross.org>, Gnucash-User
>     <gnucash-user at gnucash.org>, Steve <butterandsalt at gmail.com>
> Subject: Re: GnuCash mobile
> Message-ID: <460A6F5E-5219-4837-BCDF-02E1647CC6BC at ceridwen.us>
> Content-Type: text/plain; charset=us-ascii
>
>
> > On May 30, 2017, at 8:48 AM, Derek Atkins <warlord at mit.edu> wrote:
> >
> > Michael,
> >
> > "Fross, Michael" <michael at fross.org> writes:
> >
> >> IIRC, the goal for that is at the end of the year.  Derek, if this is
> what you
> >> mean by the C++ rewrite, then apologies for the repetition.
> >
> > No, that's not correct.  The goal for the end of this year is the C++
> > rewrite.  Turning GnuCash into a "true" database app is a longer-term
> > project, more like ~3 years out.
>
> That was the early, overly optimistic goal. It didn't happen. We've got
> C++ rewrites of part of libqof (most significantly date-time and numeric),
> the SQL backend, and the CSV importer. The task for the remainder of this
> year is to get that cleaned up and production ready.
>
> I think we can get to "true database" in the next development cycle if we
> focus on it.
>
> Regards,
> John Ralls
>
>
>
> ------------------------------
>
> Message: 9
> Date: Tue, 30 May 2017 15:46:19 -0700
> From: John Ralls <jralls at ceridwen.us>
> To: Derek Atkins <derek at ihtfp.com>
> Cc: Andy Pastuszak <apastuszak at gmail.com>, Gnucash-User
>     <gnucash-user at gnucash.org>, Steve <butterandsalt at gmail.com>
> Subject: Re: GnuCash mobile
> Message-ID: <5824E4EA-6BDE-4D61-BF20-A2E1885D0CE6 at ceridwen.us>
> Content-Type: text/plain; charset=us-ascii
>
>
> > On May 30, 2017, at 8:59 AM, Derek Atkins <derek at ihtfp.com> wrote:
> >
> > Andy,
> >
> > I believe that Geert is looking into GTK3 (not Gnome3) support, but I
> > don't know the current status or if its expected to be completed in time
> > for 2.8.
> >
>
> We got pushed to Gtk3 by RedHat withdrawing WebKit1 from Fedora 26;
> WebKit2 is available only on Gtk3. Geert's done the work, it's in the Gtk3
> branch on his Github repo. The blocker at the moment is getting a Gtk3
> Windows build, which is what I'm working on right now--though WebKit2 isn't
> supported on Windows so we have to use WebKit1 with Gtk3 there. We won't
> start the 2.7 beta cycle until Gtk3 is merged, and we won't merge Gtk3
> until the Windows build works.
>
> Regards,
> John Ralls
>
>
>
>
> ------------------------------
>
> Message: 10
> Date: Tue, 30 May 2017 18:59:55 -0400
> From: Andy Pastuszak <apastuszak at gmail.com>
> To: John Ralls <jralls at ceridwen.us>
> Cc: Derek Atkins <derek at ihtfp.com>, Gnucash-User
>     <gnucash-user at gnucash.org>,  Steve <butterandsalt at gmail.com>
> Subject: Re: GnuCash mobile
> Message-ID:
>     <CAHv5kLn7gs6WF0Hrg0eeyUAzX70G9cYgjMpprqAPq5HNp3OdWg at mail.gmail.com>
> Content-Type: text/plain; charset="UTF-8"
>
> Are there any UI changes with switching to GTK3?
>
> On Tue, May 30, 2017 at 6:46 PM, John Ralls <jralls at ceridwen.us> wrote:
>
> >
> > > On May 30, 2017, at 8:59 AM, Derek Atkins <derek at ihtfp.com> wrote:
> > >
> > > Andy,
> > >
> > > I believe that Geert is looking into GTK3 (not Gnome3) support, but I
> > > don't know the current status or if its expected to be completed in
> time
> > > for 2.8.
> > >
> >
> > We got pushed to Gtk3 by RedHat withdrawing WebKit1 from Fedora 26;
> > WebKit2 is available only on Gtk3. Geert's done the work, it's in the
> Gtk3
> > branch on his Github repo. The blocker at the moment is getting a Gtk3
> > Windows build, which is what I'm working on right now--though WebKit2
> isn't
> > supported on Windows so we have to use WebKit1 with Gtk3 there. We won't
> > start the 2.7 beta cycle until Gtk3 is merged, and we won't merge Gtk3
> > until the Windows build works.
> >
> > Regards,
> > John Ralls
> >
> >
> >
>
>
> ------------------------------
>
> Message: 11
> Date: Tue, 30 May 2017 16:45:04 -0700
> From: John Ralls <jralls at ceridwen.us>
> To: Andy Pastuszak <apastuszak at gmail.com>
> Cc: Derek Atkins <derek at ihtfp.com>, Gnucash-User
>     <gnucash-user at gnucash.org>, Steve <butterandsalt at gmail.com>
> Subject: Re: GnuCash mobile
> Message-ID: <E3CD4C4F-9AA8-4974-8F6F-3D16402755F6 at ceridwen.us>
> Content-Type: text/plain; charset=us-ascii
>
>
> > On May 30, 2017, at 3:59 PM, Andy Pastuszak <apastuszak at gmail.com>
> wrote:
> >
> > Are there any UI changes with switching to GTK3?
> >
>
> I don't know offhand, but I'd guess there will be some minor ones. Theming
> will be completely different, obviously.
>
> Regards,
> John Ralls
>
>
>
>
> ------------------------------
>
> Message: 12
> Date: Wed, 31 May 2017 09:20:36 +0200
> From: Geert Janssens <geert.gnucash at kobaltwit.be>
> To: gnucash-user at gnucash.org
> Cc: Andy Pastuszak <apastuszak at gmail.com>, John Ralls
>     <jralls at ceridwen.us>, Derek Atkins <derek at ihtfp.com>, Steve
>     <butterandsalt at gmail.com>
> Subject: Re: GnuCash mobile
> Message-ID: <2854024.9r0Me7snjZ at legolas.kobaltwit.lan>
> Content-Type: text/plain; charset="us-ascii"
>
> On woensdag 31 mei 2017 00:59:55 CEST Andy Pastuszak wrote:
> > Are there any UI changes with switching to GTK3?
> >
>
> As John said already mentioned the theming in Gtk3 is completely different
> from Gtk2. So Gnucash will look differently in some ways.
>
> I didn't deliberately make gui changes. Where necessary I did replace Gtk2
> function calls that no longer exist with Gtk3 equivalents.
>
> Regards,
>
> Geert
>
>
> ------------------------------
>
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