[GNC] Beginner Accounting Question

davidcousens49 at gmail.com davidcousens49 at gmail.com
Tue Dec 21 05:27:18 EST 2021


Patrick,

Are you setting up accounts for the business or accounts for your personal
finance? I am assuming these are the business acounts.

If you purchase itmes for the business are you intending to refund the money to
your personal accounts or are you making a contribution to the capital of the
business?

If you are intending to refund yourself for purchases for the business then you 
would record that as a Liability in a subaccount suitably labelled (Loans To
Business (credit the liability account and debit an appropriate expense account
to record the purchase and when you pay yourself back credit the business bank
account and debit the Liability sub account). When the business has paid back
all money it owes you the Liability sub account balance should be 0.

If you are contributing to the business capital with the purchase you would
credit an Equity subaccount with a name like Owner's Contributions and debit the
appropriate expense account with a suitable annotation in the description/memo
field.

If the items are major purchases, i.e. capital items which are to be used by the
business over more than a single accounting period. You would record it as an
asset with the second entry to either the equity or liability account as before
and as appropriate. It may then be either depreciated or if it is consummable
recorded as an expense as you consume it. Your jurisdiction may hae tax rules
which may impact this decision. There is usually a threshold value below which
items are normally expensed directly on purchase for example. 

The usual disclaimer applies that this should not be considered accounting
advice and if you are unsure of the rules which may apply in your jurisdiction
you should seek professioanl advice from an accountant with experience and
accreditation in your jurisdiction.

Hope this helps you in getting going with GnuCash

David Cousens




On Tue, 2021-12-21 at 09:50 +0000, Patrick Skelton wrote:
> Hi,
> 
> I'm steadily 'getting' the double-entry idea. In my accounts (which I have
> just begun experimenting with), I have an account that is called 'Personal
> Money Used'. This is of type Cash. I use this account when I use my own
> personal account (i.e. nothing to do with the business) to buy something
> for the business.
> 
> I have two questions about this account:
> 
> 1. What is the correct parent account for this? It feels to me like it is a
> Liability - money the business owes me but I suspect liabilities are debts
> to external entities (i.e. not me, the business owner).
> 2. Would I be better accounting for such purchases simply as money I put
> into the business (i.e. as an increase in Owner's Equity)?
> 
> I'm trying hard to get into this but can't afford to pay for professional
> lessons so any help at all would be very welcome.
> 
> Kind wishes  - Patrick
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