[GNC] Interest Income

[Stan Brown]

On 2023-02-20 12:16, Abe Sternberg wrote:
> I understand that part.  If I buy clothes, I debit (-) the checking
> account and credit the clothes (+) account.  It is when things are not
> obvious or go to something like an equity account that I am totally at sea.

I think you mean you _credit_ the checking account (which does indeed
reduce it) and _debit_ the clothes account (which does indeed increase
it). Your checking account is an asset, and your clothing is an expense
(assuming you're not the business of selling clothes).

Bookkeeping should not scare you. But as with learning anything new,
there's always a certain amount of memorization. Here it is:

1. ASSETS and EXPENSES: a debit increases them, a credit decreases them.
2. LIABILITIES, EQUITY, and INCOME: a debit decreases them, a credit
increases them.
3. The total of all debits in the books must equal the total of all
credits. The way you accomplish this is by ensuring that total debits
always equal total credits in each transaction.
4. (implied by 1 and 3):
ASSETS + EXPENSES = LIABILITIES + EQUITY + INCOME.
People have their favorite versions of this equation, but any valid
version can be transformed to any other, simply by moving one or more
items to the opposite side of the equation and changing their sign. Thus:
ASSETS = LIABILITIES + EQUITY + (INCOME = EXPENSE)
ASSETS - LIABILITIES - EQUITY - INCOME + EXPENSE = 0
etc.

Credit-card accounts and checking or savings accounts can be problematic
until you get used to them, because the bank's vocabulary is exactly
opposite to yours.

When you make a purchase with a credit card, your account is charged
(debited) on the bank's books, but you have increased your liability, so
you post a credit to your credit-card account on your books.

When you make a payment to your credit-card account from your checking
account, on your books that is a debit to your credit card (reducing
your liability) and a credit to your checking account (reducing an
asset). On the bank's books, it's exactly opposite.

My suggestion is, get BOOKKEEPING FOR DUMMIES or a similar book from the
library and read through it, pausing as need be to work through the
examples. (The "Dummies" label is quite insulting, but in my experience
the books themselves have been well done.)

Stan Brown
Tehachapi, CA, USA
https://BrownMath.com