[GNC] new to gnucash

[Stan Brown]

> From: Mike Kerstetter <mkerstetter62 at gmail.com>
> To: gnucash-user at gnucash.org
> 
> ... I am baffled at the seemingly backward credit and debit
> columns in the register. A deposit to my Checking (or payment to my 
> credit card account) shows up under "DEBIT" and a charge to my accounts 
> shows up under "CREDIT".? The balance is correct. Am I doing something 
> wrong in my set-up?

Hi, Mike.  Welcome to GnuCash. You'll find it's quirky, and there are a
significant number of bugs, but the developers are very responsive and
the user community is super-helpful.

Regarding debit and credit -- Americans especially are used to thinking
of "credit good, debit bad", because when you get a credit on your Visa
account that is favorable to you.

But GnuCash treats debits and credits as accountants do, and IMHO that's
a good thing -- it's one of the major factors in why I switched to
GnuCash a year ago.

Cash and bank accounts are among your assets, right?  Well, to
accountants an asset is a debit. A liability (such as your Visa account)
is a credit, and your net worth (same as equity) is also a credit.
Debits must always equal credits, and therefore

Assets (Debits) = Liabilities + Equity (Credits)

Income increases your net worth, which is a credit, and therefore income
is also a credit. Expenses reduce your net worth, and therefore expenses
are the opposite of credits, i.e. debits. That equation can be expanded
a bit, to

Assets (Debits) = Liability + Equity + (Income-Expenses) (credits)

Let's say you owe $1800 on your Visa account. That's an $1800 credit
balance on your books. If you pay $1100, you reduce your Visa balance (a
credit) to $700, and therefore you are debiting your Visa balance by
$1100. You are reducing your bank account (an asset, and therefore a
debit) by $1100, and therefore you are crediting your bank account by $1100.

When you return a $50 purchase, you're reducing (debiting) your Visa
balance $50 and also reducing (crediting) an asset account or an expense
account by $50. Why, then, do we think of "getting a credit" on our Visa
account in that situation? Because, unknowingly, we're using the
language from the viewpoint of the bank, not our own viewpoint. To the
bank, your Visa balance is an asset, and therefore a debit. That $50
return reduces the amount you owe them, and therefore reduces their
debit account, which makes it a credit on _their_ books. Their point of
view is exactly opposite to yours, because transactions that increase
their net worth reduce yours, and vice versa.

Now, all of that said, though you haven't done anything wrong in your
settings, you can set a preference to change "debits" and "credits" to
"deposits" and "withdrawals" for your bank accounts, and make
corresponding change for the other accounts.  Under Edit » Preferences »
Accounts, remove the tick mark for "use formal accounting labels". But
now that you know how things work, you may not feel the need to change them.

-- 
Regards,
Stan Brown
Tompkins County, New York, USA
http://BrownMath.com
http://OakRoadSystems.com