[GNC] I need basic help

[Murugan Muruganandam]

A typical transaction will look like this

When you use your card to buy

Dr: Expenses: Clothes : $20  Cr: Liability: CreditCard: $20
Dr: Expenses: Cable: $100    Cr: LIability: CreditCard:$100

When you get your statement and when you pay your credit card it will be

Dr: Liability: Credit Card: $120
Cr: Asset:Bank:CheckingAccount: $120


hope this helps


Saludos Cordiales


Murugan

________________________________
From: gnucash-user <gnucash-user-bounces+m.muruganandam=hotmail.com at gnucash.org> on behalf of Michael or Penny Novack <stepbystepfarm at comcast.net>
Sent: Wednesday, October 25, 2023 5:37 PM
To: gnucash-user at gnucash.org <gnucash-user at gnucash.org>
Subject: Re: [GNC] I need basic help

Back when I paid it, I just made a payment out of my bank
checking account straight to the CC company. Now, how do I assign that
transaction? It’s not a CC expense but it is an expense of some
kind—just from a different place. My CC statement will go into my
Liability Account, right? So does my payment to the CC company come out
of Assets and into Liability? And, if so, how do I assign it on the CC
Account transaction line?
> Thanks All,
> Edwin

No, it is NOT an expense of any kind.  The expenses were when you used
your credit card to buy things or pay for services. Forget that nothing
left your pocket. You incurred a debt at THOSE moments. Not when you get
around to making a payment on your credit card bill.

When you do make a payment, you debit the CC balance by that amount and
credit the bank account the check was written against. It's not an
expense, even though money left your bank account but a transfer
(reduced your debt). In other words, the transaction had no effect on
your net worth*..

Michael D Novack

* This is another case where "history" might (or might not) make it
clearer. If we go back many centuries, there were no accounts of type
income of expense. The transactions (representing income of expense)
were immediately written against equity. In other words, they
immediately affected equity wile a transaction paying against a debt
would not affect equity.

    But it was hard to report on total income or expenses for a time
period, had to search for those transactions. Many hundreds of years ago
somebody got the clever idea of having TEMPORARY accounts of type
"income" and "expense" --- they are fundamental type equity but until
closed into equity provided information about income and expense since
the last time they were closed. That closing process produced things
like the P&L report.

    With software like gnucash, most of us never close the books as
gnucash can produce the reports "pretend we did" (as if closed at the
start of the time period and closed again at the end)


Michael D Novack

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