[GNC] Asset vs Equity accounts?

[Adrien Monteleone]

While this may seem pedantic (and maybe it is), most texts present the 
Accounting Equation as:

     Assets = Liabilities + Equity

Balance Sheets are based off this arrangement of the equation. That is 
why you will generally see an Asset section first, with a total, and 
then a second section or column with a "Liabilities + Equity" total that 
exactly matches the Asset total.

Equity can be further broken down to:

     Income - Expenses

(technically, Income & Expenses are 'temporary' Equity accounts, but 
GnuCash gives them their own 'top-level' with Assets, Equity & 
Liabilities. In the pen&paper days, you closed these out at the end of 
the year to Retained Earnings, also an Equity account.)

Thus the expanded equation is:

     Assets = Liabilities + Income - Expenses


Regards,
Adrien

On 2/14/21 3:29 PM, gnu Gord wrote:
> First off I'll say I have no formal accounting training so I don't really
> understand accounting terminology or how it is represented in GnuCash.
> 
> I understand the basic idea that Equity = Assets - Liabilities, but I'm
> unsure how this should be entered in GnuCash.
> 
> Specifically, my question is; how do I know if something I have should be
> recorded in an Asset account or an Equity account?
> 
> For example, our house. The documentation says an asset is something I own.
> That would mean our house should go in the Asset account, correct?
> But the documentation also says equity is my overall net worth. If I don't
> owe anything on my house, should it be recorded in an equity account
> instead of an asset account?
> 
> What about a car, should it be recorded as an asset or equity if I own some
> of it but have a loan on it as well?
> 
> Sorry for asking so many dumb questions but my head is about to explode!!
> ;)
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