[GNC] help to set up equity sub-accounts opening balances

[doncram]

Hi Marilyn.  I like your usage of sub-accounts within equity at least to
indicate that some balance of emergency savings should be considered, when
looking at your Balance Sheet.  Like to be able to say there is X amount of
equity available beyond that amount set aside for emergency savings.  Or to
see that the net equity available is negative, if your emergency savings
amount is bigger than total equity.  Another user, in thread "non-currency
liabilities", speaks of setting up a liability account to record an amount
of savings dedicated to college in the future (for themself or for someone
else, is not clear in that thread).  But I like your showing the amount as
an equity.
About keeping "a running total for expenses which are typically annual
rather than a month-by-month" that sounds like the normal problem in
expense recognition for rent or lease expense, when the cash payment
schedule is quite different.  The "solution" is to make a sensible journal
entry each month.  Just because the lease terms allow you not to make
payments for 6 months, or whatever, the sensible amount of lease expense to
recognize each month is the total amount due over the entire 3-year lease,
say, divided by the total number of months.  Say your total cash due is
6,000, payable in one payment at the end of the year.  Then journal entries
on the first or last day of each month, would be:
      Lease expense                    $500
                 Lease payable                           $500
That would build up a "credit" balance of $6,000 in Lease Payable, a
liability account.
Then when the cash payment is made:
      Lease payable                    $6,000
                 Checking account                     $6,000
This way you see, in successive monthly balance sheet statements, a growing
liability.  And in the income statement for any period, the "correct"
amount of expense.  If you paid up front for the entire year, then the
journal entries would be similar, but you would have a prepaid lease
account as an asset:
        Prepaid lease                   $6,000
                  Checking account                    $6,000
and each month:
            Lease expense              $500
                       Prepaid lease                     $500
Or depending on the cash payment schedule, you could sometimes be in
deficit (have a Lease Payable liability) and sometimes be in surplus (have
a Prepaid Lease asset).  Anyhow, all of these entries, or all but the check
payment ones, could be put in all at once for the year, in advance.  And
probably (i am not sure) GnuCash can set an alarm at the future date when
you need to write the next check.  Doing this is some work, but is normal
for accounting for a business, and it does make your reports sensible.  I
say do it for yourself, you deserve to have your reports make sense, too. :)
Hope this helps!   --Don



On Wed, Aug 5, 2020 at 4:23 PM David Cousens <davidcousens at bigpond.com>
wrote:

> Marilyn,
>
> There should be no problem creating sub accounts of Equity at all but it
> is not really clear that you would need to. I
> have just created a sub account of equity and I have several existing sub
> accounts of equity.
>
> The mailing list archives have many discussions around allocating money
> particularly where that money is tied to a
> specific purpose with legal implications if it is spent for another
> purpose which you might find useful. These
> discussions are usually associated with non-profits where funds may be
> donated and pledged for a specific purpose. No
> one so far has written any sort of general guide to this however.
>
> Transactions to equity are generally, but not exclusively,to record
> existing balances when you open a new book.If you
> are dealing with a profit making enterprise your transactions will
> generally be between
> an asset account and either an income or expense account and it is only at
> the end of the accounting period in
> traditional accounting you would transfer the profits from the income and
> expense accounts to equity to rezero the
> temporary accounts for the next period. Gnucash has no real need to do
> this as reports can be prepared for a specific
> period without doing so ,but you can optionally do traditional accounts
> closure if you wish.
>
> David Cousens
>
>
>
>
>
> On Tue, 2020-08-04 at 15:07 +0000, Marilyn Graves Kimple via gnucash-user
> wrote:
> > I have used double-entry bookkeeping although I am not trained. In the
> past I have used what I called 'fund' accounts
> > as sub-accounts for my equity account: home maintenance, tithe, and
> emergency savings, for example. I divide my
> > 'profits' each month and accrue them through an expense account to
> accounts which are part of my total equity.
> > The object is to keep a running total for expenses which are typically
> annual rather than a month-by-month total. Can
> > I do this with GnuCash? I think I really need to do this.
> > Setting up my accounts initially I tried setting up sub-accounts under
> the parent Equity, and then under the Equity
> > sub-account Opening Balances, and it only allows me to transfer to Open
> Balances in each case. The funds in my
> > assets/liabilities account are not transferable 1 to 1 to one of these
> other accounts.
> > I may have to change the way I do things, but I would really appreciate
> help with this.  mgk
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