Farmer Question

Adrien Monteleone adrien.monteleone at gmail.com
Tue Jan 9 19:04:04 EST 2018


Jim,

I’ll post answers in-line:

Regards,
Adrien

> On Jan 9, 2018, at 5:14 PM, James Meade <jnmeade at southslope.net> wrote:
> 
> I've used Quicken for years and am considering switching to gnucash mainly because Quicken is going to a subscription pay model and I don't want to be held hostage by it or by an operating system (I always have in the back of my mind to swithc from Windows to Linux).  I know little of accounting.  In reading the manuals, I have a number of questions about setting up the gnucash system.
> 
> 1.  I have several checking accounts and use them all for both personal and business use.  It seems unfeasible to set up two sets of books.  Can/how do I separate personal from business in one set of books?

You don’t. You create the separation by creating two books, one for each. It is possible to duplicate accounts and name them accordingly but you’ll have to keep straight which is which and make sure not to use the wrong ones. There is no additional level of classification in GnuCash - everything is an account (no categories) but you can have multiple levels of accounts.

The question of “Do I separate these concerns?” is usually answered by your tax filing decision. If you file your business as a pass-through on your personal return then you likely should use one GnuCash file. If however, you file a separate business return for a legally registered business entity, then you most likely should keep two files - one for business, one for personal. You should really talk to a CPA about the best route to take for your situation. An initial consultation is not usually that pricey and well worth the money. (especially if you have all of your questions lined up already)


> 
> 2.  I have several credit cards, use them the same way as checking.  How do I set up several credit card sub accounts, e.g., notional names AB Visa, CD Mastercard, EF Visa, etc., and separate purchases for business and personal?

It’s easy to set up a credit card type account for each card. Read over the Tutorial & Concepts Guide. As for tracking purchases for each one based on business vs. personal, that depends on how you use the cards. (and the answer to question #1) If you need separation, ideally, those cards should be in the business name and kept in a separate GnuCash file. If not, and you use any card for either concern, you’ll have a lot more manual work on your hands. Again, there is no extra layer of classification here. To accomplish expense separation in one file you’d have to set up your expenses like the following example:

Expenses
>Business
>>Auto
>>Insurance
>Personal
>>Rent
>>Utilities

Of course, you might have duplicate expense account names, but you’ll need to pay attention as to which parent they are under. (as I indicated in my answer to #1)
> 
> 3.  I do all my data entry manually and am not going to change.

Not a problem. I do the same. I prefer not to import banking transactions because I don’t want to import a possible error. Manual entry also serves as a check for both me and the bank.

> 
> 4.  I have several income streams, including farming, flight instruction, writing, custom farming (e.g., mowing or plowing for someone else), military retirement, social security benefits.  Some are business and some are personal.  Any thing to consider when I set them up?

I have a similar situation (not the same streams mind you), so I created several sub accounts under “income” (which I renamed ‘revenue’ for personal taste) I have the following:

Business Sales
Labor Exchange
Gifts Received
Rents

The Business Sales account has sub-accounts for me to track revenue from each type of work I do. (my attempt to sneak in some analytical accounting, which GnuCash is not quite set up for)

Labor Exchange is for any personal work I do that is not part of my regular business.

You can indicate which if any categories (as with the expenses) you want to mark as “tax related.” This will help with reporting at the end of the year.
> 
> As I see it, my main uncertainties are about mixing personal and business and about having a number of different accounts of the same type that are used for both personal and business (i.e., checking and credit cards).

No real way around that except two sets of books (GnuCash files).  Alternative, you could try the intermediate parent account system I outlined above, but I think you’ll find it tough to keep straight. If you have separate bank accounts and credit cards for business, that makes everything much easier, even with a single GnuCash file. (the new Transaction report will allow you to filter expense accounts against an asset account, so you could see all ‘auto’ expenses that were paid for by the business checking account)

Someone else might have some tips concerning the use of notes/memos as a field to ‘mark’ expenses as deductible for business purposes, even when filing as a pass-through on a personal return. The new Transaction report might be able to take advantage of this as well.
> 
> It occurs to me that if  I have to ask these questions the prospect of using double-entry bookkeeping may be more than I should attempt.  If you think that is the case feel free to say so.  I'm trying to figure out if I want to go this way.  I tried QuickBooks about 8-10 years ago and gave it up after a couple of months.  I have the time and energy to put in, just not sure if I'm smart enough.
> 

There’s nothing inherently magical or difficult about double-entry accounting. You just have to keep in mind that money never appears or disappears. It moves from one place to another. Every entry has two sides, hence the ‘double-entry’ name, but you really accomplish this with a single transaction.

If you spend money, one side is the account you spent it from (cash, checking, savings, credit card) and the other side is either an expense account, a liability payment, or a different asset. (you moved money from savings to checking, for example)

When you earn money (or receive it - not always the same thing) one side is the reason you received/earned it, such as Sales, Wages, Gifts, or Retirement, and the other side is the form of money you received. (such as cash, check, or accounts receivable-for money earned but not yet received)

I’d highly recommend you turn on the setting in the GnuCash preferences to use the Register Default of “Transaction Journal” view. This will show you a summary line as the transaction affects the particular account register you are viewing, but also each split that makes up the transaction. (every transaction has at least two splits - a debit and a credit) This will help you see better how the system works and will help you eliminate many mistakes.


> Thanks,
> 
> Jim
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