[GNC] noobie question about split transactions

[Stan Brown (using GC 4.14)]

On 2023-11-18 14:23, Michael or Penny Novack wrote:
> On 11/18/2023 2:33 PM, timothyscully at yahoo.com wrote:
>> Ah. I think I see my error.
>>
>> When I get a credit card bill, I should open the credit card account
>> and enter each line item as a transaction. I should be able to check
>> my work by comparing the balance on the account with my bill (I always
>> pay in full every month). Then as you say, paying the bill is a simple
>> transaction between the bank account and credit card account.
> 
> In theory, you enter transactions as you make them. But there is no
> actual need to be entering transactions "real time". If you wait till
> you see the statement, remember the correct date to use (for each
> charge) would be the transaction date  (not the posting date and
> certainly not the date of the statement). HOWEVER --- you are losing
> information during reconciliation << that's more important with you bank
> account >> Also note that delayed entry is safe only when your credit
> limit is WAY more than you might charge in a month. If you have to
> consider the credit limit, enter transactions as you make them.

I agree with what Michael or Penny says here and in an earlier message
on this topic.

While it's possible to do what you say, the usual thing in bookkeeping
is to record transactions as they go along. For example, when I buy $60
worth of gasoline, I record it right away:

Expenses:Car Running Expense: debit $60.00
Liabilities:{credit card name}: credit $60.00

At the end of the billing cycle, I compare my bill to the balance in
that liability account. If there are any discrepancies, I resolve them.
Then I schedule a payment of the full balance (let's say $1200), which I
record as

Liabilities:{credit card name}: debit $1200.00
Assets:Cash and Bank: credit $1200.00

There's a principle I learned as a programmer, and I think it's
applicable here: when verifying something, use two _independent_ methods
to obtain the data, if you can. If I record transactions as they happen,
my liability balance in GC is independent of what's in my credit card;
if you enter transactions _from_ the credit card statement, you have no
real check that they are correct -- plus of course you may not remember
what a given charge was for. That may or may not be something you care
about.

Have you heard the terms "cash basis" and "accrual basis"? What Novack
and I are describing is the accrual basis. I won't tell you that one is
better than the other: to some extent it's a matter of personal
preference. Most commercial software for individuals operates on the
cash basis. Even the IRS will let you use either basis, though I don't
know anyone who uses the accrual basis for _individual_ income taxes.
Apart from some very small businesses, almost every business uses the
accrual basis. GnuCash makes it easy to use the accrual basis, but does
not force you to use it, as you've discovered.

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