[GNC] Assets vs. expenses vs. income entry

gnu Gord gnucashgord at gmail.com
Sun Feb 21 23:19:44 EST 2021


OK, it's starting to sink in, slowly.
I read chapter 11 in the GC documentation (I didn't realize I was asking
about Capital Gains) and used the example to create the accounts and
transactions in my own accounts. It seems to work... like magic.
I'll have to think about it some more and will probably have more dumb
questions.

Thanks for being so patient with me.  :)


On Sun, Feb 21, 2021 at 4:00 PM David Cousens <davidcousens at bigpond.com>
wrote:

> What has happened in the transaction?
>
> You have taken money from an asset (bank account) and exchanged that for
> another asset (a car) which you have control of and use as a resource, so
> there is not an expense involved.
>
> Hence the transaction will be a debit to your bank account (decreasing that
> asset) and a credit to an asset account for the car (increasing the value
> of
> the asset that is the car from zero).
>
> An expense is something which depletes an asset and is expended or used.
> The
> general criteria for something to be an expense is that you are going to
> use
> or consume it (or expect to) within a pewriod corresponding to the current
> accounting period (usually annual).
>
> For example, if you buy a ream of paper for your printer, you would
> generally expect to consume that within the next year or so, so you would
> generally record that as an expense and not as an asset. If you were to
> record it as an asset, then, as you printed each sheet of paper out, you
> would then have to record the value of each sheet as a separate expense, so
> that you are recording the depletion of the asset and that is clearly not
> tenable and a huge waste of effort.
>
> In a manufacturing business however you may purchase several years worth of
> materials which you expect to consume over a number of years because you
> can
> get a break on the quantity and at a good price at the current time and you
> have a reasonable expectation that prices are likely to increase. This is a
> case where you would record the purchase as an asset, and then expense the
> consumption of the asset in the year in which that consumption occurred as
> you manufactured items for sale.
>
> The value of that asset you exchanged money is depleted by depreciation,
> loss or write off in the event of an accident, losses when sold etc. Such
> changes can be recorded as expenses. Whether they are deductible expenses
> for business or taxation purposes and when those deductions are allowed
> depends on the business and tax rules and regulations you are subject to.
>
> David Cousens
>
>
>
> -----
> David Cousens
> --
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