[GNC] Record Loan Interest

[Michael or Penny Novack]

> Most loans (certainly mortgages) aren't allowed to grow like this, so the
> manual doesn't cover it. When your interest accrues, it will look like this:

Credit cards, lines of credit, etc. do

This is less a gnucash question than a fundamentals question, and once I 
show you what you might want in the CoA for this type of loan, how you 
enter transactions should become obvious. The point is that here you may 
want to track principle and interest separately. Thus :

Line of Credit       (under liabilities)

        Principle        (child of Line of Credit)

        Interest         (child of Line of Credit)

You are confusing the difference between cash basis accounting and 
accrual basis accounting by thinking that physical cash has anything to 
do with it << you are thinking about "cash flow" >> Thus if you bought a 
car (asset) by borrowing the  money, you debit car and credit loan NOW 
(even though no physical cash changed hands). In your case, you should 
debit "interest expense" and credit the loan when they charge you the 
interest. You had an expense that you paid for by assuming liability as 
of that date.

I point this out because often "line of credits" come with what look 
like checks. You might acquire an asset or pay an expense with one of 
those instead of a check against bank account. You record a transaction 
like that when it happens, not at some time in the future when you might 
make a payment against that liability (THAT is a different sort of 
transaction, essentially a "transfer").

Accrual basis accounting is something quite different. I don't think you 
should worry about what it actually is at the moment.

Michael D Novack