[GNC] Interest Income

[Abe Sternberg]

Excellent definition.  I know all the theory, but translating it into 
transactions isn't always easy for me.  I like the way you put it.

Thanks,
Abe

On 2/20/2023 16:25, Stan Brown wrote:
> 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
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