[GNC] I need basic help

[Christopher Lam]

As a non-accountant (although I pretend to be one sometimes) I can't figure
out Dr/Cr except that Dr=left,Cr=right.

But I do understand numbers (referring to dollars, or, a hot potato).

My 4 Rules:
1. Each transaction must total to zero (i.e. after a transaction is
complete, no hot potato burning my hand)
2. A positive balance in my bank account is reassuring (lots of hot
potatoes in my bank)
3. An income amount is usually negative, because it denotes the world.
(i.e. when I receive income, the world loses some potatoes).
4. No potatoes are created or destroyed

Example. I offer labour, I get paid in dollars
Income:Salary -$200
Asset:Bank +$200

I purchase from the shops
Asset:Bank -$50
Expenses:Groceries +$50

I invest some of my dollars, and borrow a lot of dollars to buy a house.
Asset:Bank -$100
Liability:Loan -$99,900
Asset:House +$100,000

etc.

Note within a transaction the total must always be zero. Incidentally
Gnucash stores amounts exactly like these potatoes above.

On Mon, 23 Oct 2023 at 01:37, Adrien Monteleone <
adrien.monteleone at lusfiber.net> 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.
>
> _______________________________________________
> gnucash-user mailing list
> gnucash-user at gnucash.org
> To update your subscription preferences or to unsubscribe:
> https://lists.gnucash.org/mailman/listinfo/gnucash-user
> -----
> Please remember to CC this list on all your replies.
> You can do this by using Reply-To-List or Reply-All.
>