[GNC] I need basic help

[sunfish62 at yahoo.com]

Doesn't Chapter 2.1 Accounting Concepts cover exactly this? 

⁣David T. ​

On Oct 22, 2023, 11:46 PM, at 11:46 PM, David Cousens <davidcousens49 at gmail.com> wrote:
>Adrien,
>
>This needs to make it into the Basics section of the Guide. I am
>planning to
>revise it when I get a break from grandchildren and other activities in
>line
>with some of flywire's comments re putting transaction explanation
>before the
>details of accounts. 
>
>David
>
>On Sun, 2023-10-22 at 12:36 -0500, Adrien Monteleone wrote:
>> Edwin,
>> 
>> Debit/Credit is just Left/Right.
>> 
>> 
>> 
>> Maybe this will help...
>> 
>> The Accounting Equation:
>> 
>> Assets - Liabilities = Equity
>> 
>>         (let's make all terms 'positive')
>> 
>> Assets = Liabilities + Equity
>> 
>>         (now, we'll split off a subset of Equity)
>> 
>> Assets = Liabilities + Equity + Retained Earnings
>> 
>>         (now, we'll substitute temporary accounts for Retained
>Earnings)
>> 
>> Assets = Liabilities + Equity + (Income - Expenses)
>> 
>>         (now, we'll once again, make all terms 'positive')
>> 
>> Assets + Expenses = Liabilities + Equity + Income
>> 
>> 
>> And there, you have the full Accounting Equation with the five major 
>> account types that GnuCash uses.
>> 
>> -----
>> 
>> In double-entry accounting, ALL transactions are in the form of:
>> 
>> Debit = Credit
>> 
>> Left = Right
>> 
>> 
>> The 'Debit' accounts (those that are normally (positive) a Debit 
>> balance, and increase with a Debit, decrease with a Credit) are on
>the 
>> left of the equation:
>> 
>> Assets
>> Expenses
>> 
>> The 'Credit' accounts (those that are normally (positive) a Credit 
>> balance, and increase with a Credit, decrease with a Debit) are those
>on 
>> the right of the equation:
>> 
>> Liabilities
>> Equity
>> Income
>> 
>> A negative balance in any account would indicate either an entry
>error 
>> or a contra-balance situation. (rare for individuals)
>> 
>> -----
>> You can move funds from the left to the right, or vice versa, or
>between 
>> any accounts or types on the same side of the equation. (I will use
>the 
>> abbreviations Dr. and Cr. here)
>> 
>> Most texts will write transactions Debit first, then Credit as shown 
>> below. The amounts are not shown, because they *must* be equal.
>> 
>> 
>> Example Left to Right - Asset to Liability (paying down a debt)
>> 
>> Dr. Liabilities:Loan
>>    Cr. Assets:Cash
>> 
>> result: decreased Loan owed, decreased Cash on hand, Assets
>decreased, 
>> Liabilities decreased - equation still in balance
>> 
>> 
>> 
>> Example Right to Left - Income to Asset (receipt of income)
>> 
>> Dr. Assets:Cash
>>    Cr. Income:Salary
>> 
>> result: increased Cash on hand, increased Salary earned, Assets 
>> increased, Income increased - equation still in balance
>> 
>> 
>> 
>> Example Left to Left(same type) - Asset to Asset (buying land
>outright)
>> 
>> Dr. Assets:Land
>>    Cr. Assets:Cash
>> 
>> result: increased Land owned, decreased Cash on hand, Assets shifted
>- 
>> equation still in balance
>> 
>> 
>> 
>> Example Left to Left(different type) - Asset to Expense (buying
>groceries)
>> 
>> Dr. Expenses:Food
>>    Cr. Assets:Cash
>> 
>> result: increased Food expense, decreased Cash on hand, Expenses 
>> increased, Assets decreased - equation still in balance
>> 
>> 
>> 
>> Example Right to Right(same type) - Liability to Liability (paying
>down 
>> a loan with a credit card)
>> 
>> Dr. Liabilities:Loan
>>    Cr. Liabilities:Credit Card
>> 
>> result: decreased Loan owed, increased Credit Card owed, Liabilities 
>> shifted - equation still in balance
>> 
>> 
>> 
>> Example Right to Right(different type) - Equity to Liability 
>> (recognition of dividends to be paid - business transaction)
>> 
>> Dr. Equity:Retained Earnings
>>    Cr. Liabilities:Dividends Payable
>> 
>> result: decreased Retained Earnings, increased Dividends owed to 
>> shareholders, Equity decreased, Liability increased - equation
>remains 
>> in balance.
>> 
>> 
>> 
>> *it is rare and unusualy for an individual to shift Equity to 
>> Liabilities and vice versa. Forgiveness of Debt may in some 
>> jurisdictions be a transfer from Liabilities to Income.
>> 
>> 
>> Regards,
>> Adrien
>> 
>> On 10/20/23 12:02 AM, Edwin Booth via gnucash-user wrote:
>> > I need to wrap my head around the whole “debit/credit” concept.
>> 
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