Best way to organize accounts

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Best way to organize accounts

eschvoca
>From what I can determine there are two fundamental ways someone can
organize their account trees:

1) Use transaction types at the top level (Assets, Equity, Expenses, Income
Liabilities)

2) Use real-life grouping at the top level (Checking Account, etc)

In (1) if your real-life Banking Account has Assets, Expenses, and
Income then you could have a separate Gnucash Banking Account under
those top level accounts.  In (2) Banking Account would appear once at
the top-level and it could contain sub-accounts of Assets, Expenses,
and Income.  Whatever is at the top level it is easy to get a summary
for all subaccounts.

Currently I've setup my accounts using form (1) but find that I can't
reconsile my statements because there is no overall balance for my
bank account.  I'm tempted to do the big switch to form (2) but I
thought I first check with people to see what their suggestions are.
If I go with (2) can I still get my total income somehow (e.g. from a
report)?

What do people recommend?

-E
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Re: Best way to organize accounts

Derek Atkins
Gnucash does not support #2.  You cannot have an Expense Account under
an Asset Account.

-derek

Quoting eschvoca <[hidden email]>:

>> From what I can determine there are two fundamental ways someone can
> organize their account trees:
>
> 1) Use transaction types at the top level (Assets, Equity, Expenses, Income
> Liabilities)
>
> 2) Use real-life grouping at the top level (Checking Account, etc)
>
> In (1) if your real-life Banking Account has Assets, Expenses, and
> Income then you could have a separate Gnucash Banking Account under
> those top level accounts.  In (2) Banking Account would appear once at
> the top-level and it could contain sub-accounts of Assets, Expenses,
> and Income.  Whatever is at the top level it is easy to get a summary
> for all subaccounts.
>
> Currently I've setup my accounts using form (1) but find that I can't
> reconsile my statements because there is no overall balance for my
> bank account.  I'm tempted to do the big switch to form (2) but I
> thought I first check with people to see what their suggestions are.
> If I go with (2) can I still get my total income somehow (e.g. from a
> report)?
>
> What do people recommend?
>
> -E
> _______________________________________________
> gnucash-user mailing list
> [hidden email]
> 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.
>



--
       Derek Atkins, SB '93 MIT EE, SM '95 MIT Media Laboratory
       Member, MIT Student Information Processing Board  (SIPB)
       URL: http://web.mit.edu/warlord/    PP-ASEL-IA     N1NWH
       [hidden email]                        PGP key available

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Re: Best way to organize accounts

Firebird-4
In reply to this post by eschvoca
I think your problem here may be a misunderstanding of how gnucash accounts
are set up and the like. Your "Checking Account" for instance should be an
asset. Every transaction you make with your checking account should in some
way pass through that account and when you get your statement it should
reconcile easily. However, since gnucash intreprets everything as an account,
all those transactions will also appear in expense accounts, income accounts,
or transfers to other asset or liability accounts (like paying off credit
cards or putting money into savings and investments). All of this works to
balance the accounting equation. For example, if you go and spend $10 on
lunch, that would be a debit to your checking account and a credit to perhaps
your Expenses:Dining Out account. Most other accounting programs use
catagories for income and expense and this can cause confusion when doing it
the gnucash way since you have to actually set up accounts that "don't exist"
in the real world. However, when you can see all your money as just transfers
between different accounts, it can get a lot clearer. Take a look through the
concepts guide (http://svn.gnucash.org/docs/guide/) for a better
understanding of all this. It does much better justice to it than I can. =)

Good luck,
-Kyle Bishop

On Tuesday 22 August 2006 18:17, eschvoca wrote:

> >From what I can determine there are two fundamental ways someone can
>
> organize their account trees:
>
> 1) Use transaction types at the top level (Assets, Equity, Expenses, Income
> Liabilities)
>
> 2) Use real-life grouping at the top level (Checking Account, etc)
>
> In (1) if your real-life Banking Account has Assets, Expenses, and
> Income then you could have a separate Gnucash Banking Account under
> those top level accounts.  In (2) Banking Account would appear once at
> the top-level and it could contain sub-accounts of Assets, Expenses,
> and Income.  Whatever is at the top level it is easy to get a summary
> for all subaccounts.
>
> Currently I've setup my accounts using form (1) but find that I can't
> reconsile my statements because there is no overall balance for my
> bank account.  I'm tempted to do the big switch to form (2) but I
> thought I first check with people to see what their suggestions are.
> If I go with (2) can I still get my total income somehow (e.g. from a
> report)?
>
> What do people recommend?
>
> -E
> _______________________________________________
> gnucash-user mailing list
> [hidden email]
> 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.
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Re: Best way to organize accounts

Josh Sled
In reply to this post by eschvoca
On Tue, 2006-08-22 at 21:17 -0400, eschvoca wrote:
> Currently I've setup my accounts using form (1) but find that I can't
> reconsile my statements because there is no overall balance for my
> bank account.  I'm tempted to do the big switch to form (2) but I

GnuCash doesn't support (2), and the example account hierarchies
distributed and encouraged in the New Account Hierarchy Druid are firmly
in the style of (1).

But... why is there no overall balance for your bank account?  If you
have an {Assets:Checking} account, its balance will reflect that
account's balance.

--
...jsled
http://asynchronous.org/ - `a=jsled; b=asynchronous.org; echo ${a}@${b}`

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Re: Best way to organize accounts

eschvoca
In reply to this post by Firebird-4
Thanks for the responses.  I think I understand my problem.  When my
bank account makes an income (e.g. from interest) I should transfer it
_from_ an Income account _to_ an Asset account.  I was thinking the
transfer happened in the other direction.  Then my balance in the
Asset bank account should equal the balance of the bank statement.  Is
that right?

-E


On 8/23/06, Firebird <[hidden email]> wrote:

> I think your problem here may be a misunderstanding of how gnucash accounts
> are set up and the like. Your "Checking Account" for instance should be an
> asset. Every transaction you make with your checking account should in some
> way pass through that account and when you get your statement it should
> reconcile easily. However, since gnucash intreprets everything as an account,
> all those transactions will also appear in expense accounts, income accounts,
> or transfers to other asset or liability accounts (like paying off credit
> cards or putting money into savings and investments). All of this works to
> balance the accounting equation. For example, if you go and spend $10 on
> lunch, that would be a debit to your checking account and a credit to perhaps
> your Expenses:Dining Out account. Most other accounting programs use
> catagories for income and expense and this can cause confusion when doing it
> the gnucash way since you have to actually set up accounts that "don't exist"
> in the real world. However, when you can see all your money as just transfers
> between different accounts, it can get a lot clearer. Take a look through the
> concepts guide (http://svn.gnucash.org/docs/guide/) for a better
> understanding of all this. It does much better justice to it than I can. =)
>
> Good luck,
> -Kyle Bishop
>
> On Tuesday 22 August 2006 18:17, eschvoca wrote:
> > >From what I can determine there are two fundamental ways someone can
> >
> > organize their account trees:
> >
> > 1) Use transaction types at the top level (Assets, Equity, Expenses, Income
> > Liabilities)
> >
> > 2) Use real-life grouping at the top level (Checking Account, etc)
> >
> > In (1) if your real-life Banking Account has Assets, Expenses, and
> > Income then you could have a separate Gnucash Banking Account under
> > those top level accounts.  In (2) Banking Account would appear once at
> > the top-level and it could contain sub-accounts of Assets, Expenses,
> > and Income.  Whatever is at the top level it is easy to get a summary
> > for all subaccounts.
> >
> > Currently I've setup my accounts using form (1) but find that I can't
> > reconsile my statements because there is no overall balance for my
> > bank account.  I'm tempted to do the big switch to form (2) but I
> > thought I first check with people to see what their suggestions are.
> > If I go with (2) can I still get my total income somehow (e.g. from a
> > report)?
> >
> > What do people recommend?
> >
> > -E
> > _______________________________________________
> > gnucash-user mailing list
> > [hidden email]
> > 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.
>
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Re: Best way to organize accounts

Derek Atkins
eschvoca <[hidden email]> writes:

> Thanks for the responses.  I think I understand my problem.  When my
> bank account makes an income (e.g. from interest) I should transfer it
> _from_ an Income account _to_ an Asset account.  I was thinking the
> transfer happened in the other direction.  Then my balance in the
> Asset bank account should equal the balance of the bank statement.  Is
> that right?

Yes.

-derek
--
       Derek Atkins, SB '93 MIT EE, SM '95 MIT Media Laboratory
       Member, MIT Student Information Processing Board  (SIPB)
       URL: http://web.mit.edu/warlord/    PP-ASEL-IA     N1NWH
       [hidden email]                        PGP key available
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Re: Best way to organize accounts

David Bear-2
Actually, gnucash uses the 'double entry' method of accounting. The
confusion occurs with the word 'account'. A savings account, checking
account credit card account do NOT NECESSARILY map to an 'account' in a
ledger. That is why an 'expense account' does not exist in the 'real world'.
An expense account represents the 'other side' of a two sided entry. Any
time any 'transfer' takes place whether it is to receive income or record
and expense there are TWO entries (or two transactions). For example, when
you buy lunch, you record that as an expense in the category of food. But
that is only one side. You also need to specify 'where' the money came from
to pay for the lunch. That money could come from your pocket change (petty
cash), a checking 'account' or a credit card.

In your response below you use the word transfer. That is not semantically
correct either in this contest. There is no transfer taking place. There are
only 2 entries recording the income. There is an entry in the 'income
account' called 'interest income' and an entry in the 'asset account' called
'checking'.

On 8/24/06, Derek Atkins <[hidden email]> wrote:

>
> eschvoca <[hidden email]> writes:
>
> > Thanks for the responses.  I think I understand my problem.  When my
> > bank account makes an income (e.g. from interest) I should transfer it
> > _from_ an Income account _to_ an Asset account.  I was thinking the
> > transfer happened in the other direction.  Then my balance in the
> > Asset bank account should equal the balance of the bank statement.  Is
> > that right?
>
> Yes.
>
> -derek
> --
>        Derek Atkins, SB '93 MIT EE, SM '95 MIT Media Laboratory
>        Member, MIT Student Information Processing Board  (SIPB)
>        URL: http://web.mit.edu/warlord/    PP-ASEL-IA     N1NWH
>        [hidden email]                        PGP key available
> _______________________________________________
> gnucash-user mailing list
> [hidden email]
> 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.
>



--
David Bear
What's the difference between private knowledge and public knowledge?
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Re: Best way to organize accounts

David Brock-2
This is true for a very limited definition of the word "account" but
really, asset accounts and liability accounts are just as theoretical as
expense and revenue accounts, we're just more used to the idea that my
"savings account" (asset) has $X in it, or that I owe $Y on my mortgage
(liability).  In fact, it's called an "account" because that's just what
it is - an account of money.

The bank doesn't have a physical mail slot where they put your $10's &
$20's, rather, they take the money that they've "accounted" for as
yours, and they (usually) loan it out to someone else, and "account" for
it.

An expense or revenue account is simply a record of where the money
"came from" or "went to".  An asset or liability account is where the
actual money "is" or "isn't".

Gnucash, and double entry accounting, does it correctly.

;-David

On Thu, 2006-08-24 at 18:54 -0700, David Bear wrote:

> Actually, gnucash uses the 'double entry' method of accounting. The
> confusion occurs with the word 'account'. A savings account, checking
> account credit card account do NOT NECESSARILY map to an 'account' in a
> ledger. That is why an 'expense account' does not exist in the 'real world'.
> An expense account represents the 'other side' of a two sided entry. Any
> time any 'transfer' takes place whether it is to receive income or record
> and expense there are TWO entries (or two transactions). For example, when
> you buy lunch, you record that as an expense in the category of food. But
> that is only one side. You also need to specify 'where' the money came from
> to pay for the lunch. That money could come from your pocket change (petty
> cash), a checking 'account' or a credit card.
>
> In your response below you use the word transfer. That is not semantically
> correct either in this contest. There is no transfer taking place. There are
> only 2 entries recording the income. There is an entry in the 'income
> account' called 'interest income' and an entry in the 'asset account' called
> 'checking'.
>
> On 8/24/06, Derek Atkins <[hidden email]> wrote:
> >
> > eschvoca <[hidden email]> writes:
> >
> > > Thanks for the responses.  I think I understand my problem.  When my
> > > bank account makes an income (e.g. from interest) I should transfer it
> > > _from_ an Income account _to_ an Asset account.  I was thinking the
> > > transfer happened in the other direction.  Then my balance in the
> > > Asset bank account should equal the balance of the bank statement.  Is
> > > that right?
> >
> > Yes.
> >
> > -derek
> > --
> >        Derek Atkins, SB '93 MIT EE, SM '95 MIT Media Laboratory
> >        Member, MIT Student Information Processing Board  (SIPB)
> >        URL: http://web.mit.edu/warlord/    PP-ASEL-IA     N1NWH
> >        [hidden email]                        PGP key available
> > _______________________________________________
> > gnucash-user mailing list
> > [hidden email]
> > 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.
> >
>
>
>

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Re: Best way to organize accounts

eschvoca
Thanks for the clarification.  One more question.  I have a "line of
credit" account which also functions as my checking account (I rarely
have a positive balance).  Since I want to use my downloaded statement
(which has a credit balance) then should I set this account up as a
liability?

-E

On 8/25/06, David Brock <[hidden email]> wrote:

> This is true for a very limited definition of the word "account" but
> really, asset accounts and liability accounts are just as theoretical as
> expense and revenue accounts, we're just more used to the idea that my
> "savings account" (asset) has $X in it, or that I owe $Y on my mortgage
> (liability).  In fact, it's called an "account" because that's just what
> it is - an account of money.
>
> The bank doesn't have a physical mail slot where they put your $10's &
> $20's, rather, they take the money that they've "accounted" for as
> yours, and they (usually) loan it out to someone else, and "account" for
> it.
>
> An expense or revenue account is simply a record of where the money
> "came from" or "went to".  An asset or liability account is where the
> actual money "is" or "isn't".
>
> Gnucash, and double entry accounting, does it correctly.
>
> ;-David
>
> On Thu, 2006-08-24 at 18:54 -0700, David Bear wrote:
> > Actually, gnucash uses the 'double entry' method of accounting. The
> > confusion occurs with the word 'account'. A savings account, checking
> > account credit card account do NOT NECESSARILY map to an 'account' in a
> > ledger. That is why an 'expense account' does not exist in the 'real world'.
> > An expense account represents the 'other side' of a two sided entry. Any
> > time any 'transfer' takes place whether it is to receive income or record
> > and expense there are TWO entries (or two transactions). For example, when
> > you buy lunch, you record that as an expense in the category of food. But
> > that is only one side. You also need to specify 'where' the money came from
> > to pay for the lunch. That money could come from your pocket change (petty
> > cash), a checking 'account' or a credit card.
> >
> > In your response below you use the word transfer. That is not semantically
> > correct either in this contest. There is no transfer taking place. There are
> > only 2 entries recording the income. There is an entry in the 'income
> > account' called 'interest income' and an entry in the 'asset account' called
> > 'checking'.
> >
> > On 8/24/06, Derek Atkins <[hidden email]> wrote:
> > >
> > > eschvoca <[hidden email]> writes:
> > >
> > > > Thanks for the responses.  I think I understand my problem.  When my
> > > > bank account makes an income (e.g. from interest) I should transfer it
> > > > _from_ an Income account _to_ an Asset account.  I was thinking the
> > > > transfer happened in the other direction.  Then my balance in the
> > > > Asset bank account should equal the balance of the bank statement.  Is
> > > > that right?
> > >
> > > Yes.
> > >
> > > -derek
> > > --
> > >        Derek Atkins, SB '93 MIT EE, SM '95 MIT Media Laboratory
> > >        Member, MIT Student Information Processing Board  (SIPB)
> > >        URL: http://web.mit.edu/warlord/    PP-ASEL-IA     N1NWH
> > >        [hidden email]                        PGP key available
> > > _______________________________________________
> > > gnucash-user mailing list
> > > [hidden email]
> > > 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.
> > >
> >
> >
> >
>
> _______________________________________________
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> https://lists.gnucash.org/mailman/listinfo/gnucash-user
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Re: Best way to organize accounts

Cam Ellison
eschvoca wrote:
> Thanks for the clarification.  One more question.  I have a "line of
> credit" account which also functions as my checking account (I rarely
> have a positive balance).  Since I want to use my downloaded statement
> (which has a credit balance) then should I set this account up as a
> liability?

In a word: no.  The fact that you have a negative balance does not make
it a liability.  It is a source of funds, not a sink.

Cam


--
Cam Ellison, Ph.D. R.Psych. #1417

Cam Ellison & Associates Ltd.
3446 Beach Avenue
Roberts Creek BC      V0N 2W2
Phone:           604-885-4806
Fax:             604-885-4809

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