[GNC] Assets vs. expenses vs. income entry
Stephen M. Butler
Stephen.M.Butler51 at gmail.com
Sun Feb 21 21:30:21 EST 2021
On 2/21/21 5:45 PM, Stan Brown wrote:
> On 2021-02-21 15:22, gnu Gord wrote:
>> I'm unsure of the best way to record the adding/modifying of an asset.
>> Should the transaction go directly to an asset account or an expense
>> account then create an asset? Let me explain.
> I started writing out a detailed reply, but David Cousens said it all
> well, and rather than just pile on I will say that I agree with what he
> said.
>
> I'll add one thing: if you find yourself asking "should I record a
> transaction to equity", the answer is almost certainly No. Changes in
> your net worth arise from income and expenses, so they should be
> recorded in the appropriate Income or Expense accounts.
>
> Buying an asset doesn't change your net worth, and therefore it is not
> income or expense; the same is true of paying a bill or paying principal
> on a loan. (The interest portion of a loan payment is an expense; the
> principal portion is just a debit to a liability account.)
>
This page has become a reference page for me -- unless my wife is around
and then it is easier to ask her.
https://www.accountingtools.com/articles/2017/5/17/debits-and-credits
The summary: Credits go next to the window -- just gotta remember which
chair I need to set in when making that amazing discovery. <<window to
right when facing computer screen>>
Debit Accounts -- increase in value on a debit entry: Assets, Expenses,
Losses. Note that a credit to these accounts reduce value.
Credit Accounts -- increase in value on a credit entry: Liabilities,
Equity/Capital, Income/Revenue, Gains. A debit to these accounts
reduces value.
--
Stephen M Butler, PMP, PSM
Stephen.M.Butler51 at gmail.com
kg7je at arrl.net
253-350-0166
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