Profit and loss/Cash Flow reporting question

[John R. Sowden]

Couple of thoughts:
A company cannot buy itself.  If this is a sole proprietorship, the OP 
could take funds out to pay the note from an owner's draw account.  The 
interest probably would not be deductible by the business, but instead 
by the buyer on his tax return.  On the other hand, if it is a separate 
entity, then he would have to buy it either from his wages, from the 
bank account where he deposits his checking account, or from dividends.

John


On 05/31/2017 03:14 PM, Mike or Penny Novack wrote:
> On 5/31/2017 4:13 PM, Martijn Heuts 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.
>> Martijn Heuts
> No, it is not an expense. You assumed this liability to pay an 
> expense. THAT transaction was a debit to a expense account and a 
> credit to a liability account. Later you paid off this loan and that 
> transaction was a debit to the liability account and a credit to cash 
> << no expense account involved >>
>
> Did these two transactions took place in different accounting periods 
> (date ranges of the reports) ?
>
> In any case, how to do accounting using gnucash (as opposed to using a 
> different package or even old fashioned pen and ink on paper or 
> slightly newer spreadsheets with columns just like accounting paper) 
> is NOT the same as "how to do accounting". You really do need to go 
> through an "accounting 101" sort of text.
>
> Michael
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