Don't understand imbalance

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Don't understand imbalance

houndhen
New to GnuCash. Coming over from Quickbooks. Running 2.2.6 under Mepis 8.0 beta 5. I have a split transaction where I paid a credit card bill. The first row has the total amount in the withdrawal column. The split amounts are listed in the deposit column. The split amounts equal the withdrawal amount. The next row below the splits in the withdrawal column there is the same amount that is in the withdrawal column on the first row. I have other split transactions but this is the only imbalance that shows up when I open the imbalance account. Do I need to delete this transaction and re-enter it or can I fix it to get rid of the imbalance. Just guessing that the imbalance is not a good thing.

Thanks,
Harold



     
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Re: Don't understand imbalance

Mike or Penny Novack

>New to GnuCash. Coming over from Quickbooks. Running 2.2.6 under Mepis 8.0 beta 5. I have a split transaction where I paid a credit card bill. The first row has the total amount in the withdrawal column. The split amounts are listed in the deposit column. The split amounts equal the withdrawal amount. The next row below the splits in the withdrawal column there is the same amount that is in the withdrawal column on the first row. I have other split transactions but this is the only imbalance that shows up when I open the imbalance account. Do I need to delete this transaction and re-enter it or can I fix it to get rid of the imbalance. Just guessing that the imbalance is not a good thing.
>
>Thanks,
>Harold
>  
>
Imbalance very bad, something is wrong.

But I can't understand what you are describing. Normally paying a credit
card bill would not be a "split". You have an account of type credit
card (a sub type of liability) and you are writing a check (decreasing
the account of type "checking", a sub type of asset) and decreasing the
liability (you are decreasing both because assets and liabilities are on
opposite sides of the ledger). Though I could see that happening if you
were writing one check to pay the balances of several credit card
accounts. Tell us what are these splits. If you are trying to split
expenses, wrong. Those you record as of the date you made the credit
card charges (you paid not in cash but by assuming a liability) and not
when you got around to paying the bill.

Michael
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Re: Don't understand imbalance

houndhen
I don't record the credit card charges as I incur them. I don't use liabilities and then pay them. As I understand accounting (not very much) I am operating on a cash basis and therefore just pay the bills when then come in and are due. The check is made out to the credit card company but I split the total out to the different expense accounts. BTW this is not a business but my personal stuff. The splits are health insurance, books, and medical expenses. These splits add up to the amount of the credit card bill. Here is what it looks like:
Description                Account               Deposit          Withdrawal
credit card                                                                                    366.90
                                   health ins                        292.40
                                    books                                 12.00
                                   medical costs                    62.50
                                   bank account                                             366.90

Which 366.90 is the one not needed? Hope this comes thru sort of in the columns as I intended.

Thanks
Harold

--- On Fri, 11/21/08, Mike or Penny Novack <[hidden email]> wrote:
From: Mike or Penny Novack <[hidden email]>
Subject: Re: Don't understand imbalance
To: [hidden email]
Cc: [hidden email]
Date: Friday, November 21, 2008, 10:12 AM

> New to GnuCash. Coming over from Quickbooks. Running 2.2.6 under Mepis 8.0
beta 5. I have a split transaction where I paid a credit card bill. The first
row has the total amount in the withdrawal column. The split amounts are listed
in the deposit column. The split amounts equal the withdrawal amount. The next
row below the splits in the withdrawal column there is the same amount that is
in the withdrawal column on the first row. I have other split transactions but
this is the only imbalance that shows up when I open the imbalance account. Do I
need to delete this transaction and re-enter it or can I fix it to get rid of
the imbalance. Just guessing that the imbalance is not a good thing.
> Thanks,
> Harold
>  
Imbalance very bad, something is wrong.

But I can't understand what you are describing. Normally paying a credit
card bill would not be a "split". You have an account of type credit
card (a sub type of liability) and you are writing a check (decreasing the
account of type "checking", a sub type of asset) and decreasing the
liability (you are decreasing both because assets and liabilities are on
opposite sides of the ledger). Though I could see that happening if you were
writing one check to pay the balances of several credit card accounts. Tell us
what are these splits. If you are trying to split expenses, wrong. Those you
record as of the date you made the credit card charges (you paid not in cash but
by assuming a liability) and not when you got around to paying the bill.

Michael



     
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Re: Don't understand imbalance

Robert Heller
In reply to this post by Mike or Penny Novack
At Fri, 21 Nov 2008 11:12:25 -0500 [hidden email] wrote:

>
>
> >New to GnuCash. Coming over from Quickbooks. Running 2.2.6 under Mepis 8.0 beta 5. I have a split transaction where I paid a credit card bill. The first row has the total amount in the withdrawal column. The split amounts are listed in the deposit column. The split amounts equal the withdrawal amount. The next row below the splits in the withdrawal column there is the same amount that is in the withdrawal column on the first row. I have other split transactions but this is the only imbalance that shows up when I open the imbalance account. Do I need to delete this transaction and re-enter it or can I fix it to get rid of the imbalance. Just guessing that the imbalance is not a good thing.
> >
> >Thanks,
> >Harold
> >  
> >
> Imbalance very bad, something is wrong.
>
> But I can't understand what you are describing. Normally paying a credit
> card bill would not be a "split". You have an account of type credit
> card (a sub type of liability) and you are writing a check (decreasing
> the account of type "checking", a sub type of asset) and decreasing the
> liability (you are decreasing both because assets and liabilities are on
> opposite sides of the ledger). Though I could see that happening if you
> were writing one check to pay the balances of several credit card
> accounts. Tell us what are these splits. If you are trying to split
> expenses, wrong. Those you record as of the date you made the credit
> card charges (you paid not in cash but by assuming a liability) and not
> when you got around to paying the bill.

I have a 'line of credit', and when I make payments, I create a split
that includes the gross payment (from my checking  account) and
separated out amounts for the principle, finance charges, and insurance
charges. Maybe the OP is also doing this?

>
> Michael
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Re: Don't understand imbalance

Robert Heller
In reply to this post by houndhen
At Fri, 21 Nov 2008 09:16:09 -0800 (PST) [hidden email] wrote:

>
> I don't record the credit card charges as I incur them. I don't use
> liabilities and then pay them. As I understand accounting (not very
> much) I am operating on a cash basis and therefore just pay the bills
> when then come in and are due. The check is made out to the credit card
> company but I split the total out to the different expense accounts.
> BTW this is not a business but my personal stuff. The splits are health
> insurance, books, and medical expenses. These splits add up to the
> amount of the credit card bill. Here is what it looks like:

This is really wrong. You should be recording each charge as a separate
transaction (from the credit card account to an expense account).

> Description                Account               Deposit          Withdrawal
> credit card                                                                                    366.90
>                                    health ins                        292.40
>                                     books                                 12.00
>                                    medical costs                    62.50
>                                    bank account                                             366.90
>
> Which 366.90 is the one not needed? Hope this comes thru sort of in the columns as I intended.
>
> Thanks
> Harold
>
> --- On Fri, 11/21/08, Mike or Penny Novack <[hidden email]> wrote:
> From: Mike or Penny Novack <[hidden email]>
> Subject: Re: Don't understand imbalance
> To: [hidden email]
> Cc: [hidden email]
> Date: Friday, November 21, 2008, 10:12 AM
>
> > New to GnuCash. Coming over from Quickbooks. Running 2.2.6 under Mepis 8.0
> beta 5. I have a split transaction where I paid a credit card bill. The first
> row has the total amount in the withdrawal column. The split amounts are listed
> in the deposit column. The split amounts equal the withdrawal amount. The next
> row below the splits in the withdrawal column there is the same amount that is
> in the withdrawal column on the first row. I have other split transactions but
> this is the only imbalance that shows up when I open the imbalance account. Do I
> need to delete this transaction and re-enter it or can I fix it to get rid of
> the imbalance. Just guessing that the imbalance is not a good thing.
> > Thanks,
> > Harold
> >  
> Imbalance very bad, something is wrong.
>
> But I can't understand what you are describing. Normally paying a credit
> card bill would not be a "split". You have an account of type credit
> card (a sub type of liability) and you are writing a check (decreasing the
> account of type "checking", a sub type of asset) and decreasing the
> liability (you are decreasing both because assets and liabilities are on
> opposite sides of the ledger). Though I could see that happening if you were
> writing one check to pay the balances of several credit card accounts. Tell us
> what are these splits. If you are trying to split expenses, wrong. Those you
> record as of the date you made the credit card charges (you paid not in cash but
> by assuming a liability) and not when you got around to paying the bill.
>
> Michael
>
>
>
>      
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Re: Don't understand imbalance

Mike or Penny Novack
In reply to this post by houndhen
Harold wrote:

> I don't record the credit card charges as I incur them. I don't use
> liabilities and then pay them. As I understand accounting (not very
> much) I am operating on a cash basis and therefore just pay the bills
> when then come in and are due.
>
Confusion as to what is meant by "cash basis". Concepts like "accounts
receivable" and "accounts payable" aren't limited to "accrual bookkeeping".

Perhaps the confusion is because you used the card for the purchase of
physical goods of some sort? Try this example. Using your credit card,
you go to an ATM and obtain money. You wouldn't think of this as if it
were income, would you? Yes it's an increase in assets (cash in pocket)
but it's also an increase in liabilities (credit card balance). When did
you experience this increase in cash in pocket? When you took it from
the ATM or when you later wrote a check to pay the credit card bill? It
wasn't the same as if you waited to the date at which you later paid the
bill, walked into the bank, and cashed a check was it?

The same with the expense side. You buy something with the credit card
instead of with cash from pocket or check from checking account. You
bought it when you bought it, not later when you paid the bill. In
between you owed somebody cash.

Accrual bookkeeping is something else.
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Liz
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Re: Don't understand imbalance

Liz
In reply to this post by houndhen
On Sat, 22 Nov 2008, Harold wrote:

> Description                Account               Deposit         
> Withdrawal credit
> card                                                                       
>             366.90 health ins                        292.40
> books                                 12.00 medical
> costs                    62.50 bank
> account                                             366.90
>
> Which 366.90 is the one not needed? Hope this comes thru sort of in the
> columns as I intended.

all of those lines should be there.
(ignoring the other comments on how your books are organised)
so this is not the 'imbalance problem'
i would delete and try again.


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Re: Don't understand imbalance

Doug Laidlaw
On Saturday 22 November 2008 7:05:14 am Elizabeth Dodd wrote:

> On Sat, 22 Nov 2008, Harold wrote:
> > Description                Account               Deposit         
> > Withdrawal credit
> > card                                                                     
> >   366.90 health ins                        292.40
> > books                                 12.00 medical
> > costs                    62.50 bank
> > account                                             366.90
> >
> > Which 366.90 is the one not needed? Hope this comes thru sort of in the
> > columns as I intended.
>
> all of those lines should be there.
> (ignoring the other comments on how your books are organised)
> so this is not the 'imbalance problem'
> i would delete and try again.

I would defer to you, Elizabeth, but on the example (the columns got out of
sync in your reply) I see a credit card entry and a bank account entry both
on the RH side.  Only one can be right.  Assuming that it is a charge to the
credit card, it didn't affect the bank balance as well.  That is the line
that should be deleted.

Doug.
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Re: Don't understand imbalance

Maf. King
In reply to this post by Liz
On Friday 21 November 2008 20:05:14 Elizabeth Dodd wrote:

> On Sat, 22 Nov 2008, Harold wrote:
> > Description                Account               Deposit         
> > Withdrawal credit
> > card                                                                     
> >   366.90 health ins                        292.40
> > books                                 12.00 medical
> > costs                    62.50 bank
> > account                                             366.90
> >
> > Which 366.90 is the one not needed? Hope this comes thru sort of in the
> > columns as I intended.
>
> all of those lines should be there.
> (ignoring the other comments on how your books are organised)
> so this is not the 'imbalance problem'
> i would delete and try again.

Not withstanding all the other comments about credit card accounts, with which
I agree, I can see why the txn is unbalanced.   The credit card should start
at zero, and end at zero.  therefore, you are actually combining the
following txns into one:

CCard Exps:health ins     +292.40
CCard Exps:books    +12.00
CCard Exps:medical   +62.50

and:

CCard Bank -366.90

In effect you either need another "CCard" split in your txn to deal with the
funds coming from the bank (equal and opposite to the one already there) or
you set the existing split to 0.00, (just to tie the txn to the CCard
account.)

I haven't explained myself very clearly, but it is hard to get over the fact
that what you are doing is, well not wrong as such, but so obtuse to
GAAP/double entry that I only feel like I have a slender grasp of the
problem...

HTH,
Maf.
 





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Re: Don't understand imbalance

Doug Laidlaw
In reply to this post by Doug Laidlaw
On Saturday 22 November 2008 7:28:14 am Doug Laidlaw wrote:

> On Saturday 22 November 2008 7:05:14 am Elizabeth Dodd wrote:
> > On Sat, 22 Nov 2008, Harold wrote:
> > > Description                Account               Deposit         
> > > Withdrawal credit
> > > card                                                                   
> > >   366.90 health ins                        292.40
> > > books                                 12.00 medical
> > > costs                    62.50 bank
> > > account                                             366.90
> > >
> > > Which 366.90 is the one not needed? Hope this comes thru sort of in the
> > > columns as I intended.
> >
> > all of those lines should be there.
> > (ignoring the other comments on how your books are organised)
> > so this is not the 'imbalance problem'
> > i would delete and try again.
>
> I would defer to you, Elizabeth, but on the example (the columns got out of
> sync in your reply) I see a credit card entry and a bank account entry both
> on the RH side.  Only one can be right.  Assuming that it is a charge to
> the credit card, it didn't affect the bank balance as well.  That is the
> line that should be deleted.
>
> Doug.
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As usual, I didn't read the thread from the beginning.

What is really happening is this:

Harold gets a credit card statement.  He should enter that up under Credit
Card as

Debits:
Health Ins: $292.40
Books    12.00
Medical Costs    62.50

Credit entry for the total to balance: $366.90

THEN pay the balance out of the bank account:
Debit Credit Card (reduces the liability) $366.90
Credit Bank account (reduces the asset) $366.90

If Harold wants to keep doing it his way, leave the credit card account right
out of it. Just debit each expense account, and credit Bank.  But the first
way is more "correct," I think.  It follows the rule of entering up
everything from your bank statements before bringing down a balance to pay.

HTH,

Doug.
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Re: Don't understand imbalance

houndhen
In reply to this post by Robert Heller
Sorry about the mess. My columns didn't hold up. I was afraid of that.

quote>This is really wrong. You should be recording each charge as a separate transaction (from the credit card account to an expense account).<quote

Not sure what you mean by this.


     
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Re: Don't understand imbalance

houndhen
In reply to this post by Mike or Penny Novack
The way I have been doing it goes along with my thinking this way:

I make several purchases with my credit card. This represents money from my bank account but it hasn't been taken out yet. When the bill comes in then I take the money from checking and pay the credit card bill and allocate the different purchases to the different expense accounts.

I am not arguing and definitely am not an accountant, but I don't see the need to go through two more steps of posting the purchases in liabilities or accounts payable and then having to relieve those accounts. To me, my way cuts out a couple of unneeded steps for my home finances.

I will just delete the transaction and re-enter it and post back what I have then.

Harold

--- On Fri, 11/21/08, Mike or Penny Novack <[hidden email]> wrote:
From: Mike or Penny Novack <[hidden email]>
Subject: Re: Don't understand imbalance
To: [hidden email]
Cc: [hidden email]
Date: Friday, November 21, 2008, 1:24 PM

Harold wrote:

> I don't record the credit card charges as I incur them. I don't
use liabilities and then pay them. As I understand accounting (not very much) I
am operating on a cash basis and therefore just pay the bills when then come in
and are due.
>
Confusion as to what is meant by "cash basis". Concepts like
"accounts receivable" and "accounts payable" aren't
limited to "accrual bookkeeping".

Perhaps the confusion is because you used the card for the purchase of physical
goods of some sort? Try this example. Using your credit card, you go to an ATM
and obtain money. You wouldn't think of this as if it were income, would
you? Yes it's an increase in assets (cash in pocket) but it's also an
increase in liabilities (credit card balance). When did you experience this
increase in cash in pocket? When you took it from the ATM or when you later
wrote a check to pay the credit card bill? It wasn't the same as if you
waited to the date at which you later paid the bill, walked into the bank, and
cashed a check was it?

The same with the expense side. You buy something with the credit card instead
of with cash from pocket or check from checking account. You bought it when you
bought it, not later when you paid the bill. In between you owed somebody cash.

Accrual bookkeeping is something else.



     
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Re: Don't understand imbalance

houndhen
In reply to this post by Liz
Will do Elizabeth.

--- On Fri, 11/21/08, Elizabeth Dodd <[hidden email]> wrote:
From: Elizabeth Dodd <[hidden email]>
Subject: Re: Don't understand imbalance
To: [hidden email]
Date: Friday, November 21, 2008, 2:05 PM

On Sat, 22 Nov 2008, Harold wrote:
> Description               
Account               Deposit         
> Withdrawal credit
>
card                                                                       
>             366.90 health
ins                        292.40
> books                                 12.00
medical
> costs                    62.50 bank
>
account                                            
366.90
>
> Which 366.90 is the one not needed? Hope this comes thru sort of in the
> columns as I intended.

all of those lines should be there.
(ignoring the other comments on how your books are organised)
so this is not the 'imbalance problem'
i would delete and try again.


--
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expected."
-- The Unix Programmer's Manual, 2nd Edition, June, 1972
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Re: Don't understand imbalance

houndhen
In reply to this post by Doug Laidlaw
Thanks Doug. I tend to get confused (I know I shouldn't but I do) when people use debit and credit. I understand it better when I can see whether it is added to or taken away. If I take the money away from my checking and send it to the credit card company and at the same time the splits are added to the expense for those accounts, then that makes sense to me. Gosh, I can't imagine all of this not being confusing to someone else.

Thanks everyone. I will delete and re-enter (as I have already posted) and will post back the result.

Harold

--- On Fri, 11/21/08, Doug Laidlaw <[hidden email]> wrote:
From: Doug Laidlaw <[hidden email]>
Subject: Re: Don't understand imbalance
To: [hidden email]
Date: Friday, November 21, 2008, 2:49 PM

On Saturday 22 November 2008 7:28:14 am Doug Laidlaw wrote:
> On Saturday 22 November 2008 7:05:14 am Elizabeth Dodd wrote:
> > On Sat, 22 Nov 2008, Harold wrote:
> > > Description               
Account               Deposit         
> > > Withdrawal credit
> > >
card                                                                   
> > >   366.90 health
ins                        292.40
> > > books                              
  12.00 medical
> > > costs                    62.50 bank
> > >
account                                            
366.90
> > >
> > > Which 366.90 is the one not needed? Hope this comes thru sort of
in the
> > > columns as I intended.
> >
> > all of those lines should be there.
> > (ignoring the other comments on how your books are organised)
> > so this is not the 'imbalance problem'
> > i would delete and try again.
>
> I would defer to you, Elizabeth, but on the example (the columns got out
of
> sync in your reply) I see a credit card entry and a bank account entry
both
> on the RH side.  Only one can be right.  Assuming that it is a charge to
> the credit card, it didn't affect the bank balance as well.  That is
the

> line that should be deleted.
>
> Doug.
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As usual, I didn't read the thread from the beginning.

What is really happening is this:

Harold gets a credit card statement.  He should enter that up under Credit
Card as

Debits:
Health Ins: $292.40
Books    12.00
Medical Costs    62.50

Credit entry for the total to balance: $366.90

THEN pay the balance out of the bank account:
Debit Credit Card (reduces the liability) $366.90
Credit Bank account (reduces the asset) $366.90

If Harold wants to keep doing it his way, leave the credit card account right
out of it. Just debit each expense account, and credit Bank.  But the first
way is more "correct," I think.  It follows the rule of entering up
everything from your bank statements before bringing down a balance to pay.

HTH,

Doug.
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Re: Don't understand imbalance

Doug Laidlaw
In reply to this post by houndhen
O.K. Harold.  You aren't the only one who is confused by debits and credits.  
Just remember that your books are the opposite of the bank's.

 You can write the check in favour of the credit card, just don't use the
credit card *account.*

Doug.

On Saturday 22 November 2008 8:23:23 am Harold wrote:

> Thanks Doug. I tend to get confused (I know I shouldn't but I do) when
> people use debit and credit. I understand it better when I can see whether
> it is added to or taken away. If I take the money away from my checking and
> send it to the credit card company and at the same time the splits are
> added to the expense for those accounts, then that makes sense to me. Gosh,
> I can't imagine all of this not being confusing to someone else.
>
> Thanks everyone. I will delete and re-enter (as I have already posted) and
> will post back the result.
>
> Harold
>
> --- On Fri, 11/21/08, Doug Laidlaw <[hidden email]> wrote:
> From: Doug Laidlaw <[hidden email]>
> Subject: Re: Don't understand imbalance
> To: [hidden email]
> Date: Friday, November 21, 2008, 2:49 PM
>
> On Saturday 22 November 2008 7:28:14 am Doug Laidlaw wrote:
> > On Saturday 22 November 2008 7:05:14 am Elizabeth Dodd wrote:
> > > On Sat, 22 Nov 2008, Harold wrote:
> > > > Description               
>
> Account               Deposit         
>
> > > > Withdrawal credit
>
> card                                                                   
>
> > > >   366.90 health
>
> ins                        292.40
>
> > > > books                              
>
>   12.00 medical
>
> > > > costs                    62.50 bank
>
> account                                            
> 366.90
>
> > > > Which 366.90 is the one not needed? Hope this comes thru sort of
>
> in the
>
> > > > columns as I intended.
> > >
> > > all of those lines should be there.
> > > (ignoring the other comments on how your books are organised)
> > > so this is not the 'imbalance problem'
> > > i would delete and try again.
> >
> > I would defer to you, Elizabeth, but on the example (the columns got out
>
> of
>
> > sync in your reply) I see a credit card entry and a bank account entry
>
> both
>
> > on the RH side.  Only one can be right.  Assuming that it is a charge to
> > the credit card, it didn't affect the bank balance as well.  That is
>
> the
>
> > line that should be deleted.
> >
> > Doug.
> > _______________________________________________
> > 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.
>
> As usual, I didn't read the thread from the beginning.
>
> What is really happening is this:
>
> Harold gets a credit card statement.  He should enter that up under Credit
> Card as
>
> Debits:
> Health Ins: $292.40
> Books    12.00
> Medical Costs    62.50
>
> Credit entry for the total to balance: $366.90
>
> THEN pay the balance out of the bank account:
> Debit Credit Card (reduces the liability) $366.90
> Credit Bank account (reduces the asset) $366.90
>
> If Harold wants to keep doing it his way, leave the credit card account
> right out of it. Just debit each expense account, and credit Bank.  But the
> first way is more "correct," I think.  It follows the rule of entering up
> everything from your bank statements before bringing down a balance to pay.
>
> HTH,
>
> Doug.
> _______________________________________________
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> https://lists.gnucash.org/mailman/listinfo/gnucash-user
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Re: Don't understand imbalance

Robert Heller
In reply to this post by houndhen
At Fri, 21 Nov 2008 13:15:36 -0800 (PST) [hidden email] wrote:

>
> The way I have been doing it goes along with my thinking this way:
>
> I make several purchases with my credit card. This represents money
> from my bank account but it hasn't been taken out yet. When the bill
> comes in then I take the money from checking and pay the credit card
> bill and allocate the different purchases to the different expense
> accounts.

Actually is is NOT 'money from my bank account but it hasn't been taken
out yet', it is in fact money you *borrowed* from the credit card company.
And you did in fact 'spend it' when you bought the items in question.
Just because you pay off your balance every month it is no less an act
of borrowing.  The credit card company considers each transaction as a
separate transaction and should you ever decide to set up the on-line
banking interface (or simply start downloading OFX files from your
credit card company and/or bank, that is how it will look in the OFX
files.  Doing something else will only make things harder.

>
> I am not arguing and definitely am not an accountant, but I don't see
> the need to go through two more steps of posting the purchases in
> liabilities or accounts payable and then having to relieve those
> accounts. To me, my way cuts out a couple of unneeded steps for my home
> finances.

You are not really saving steps here, instead you are collecting them
together in a large, complex, and confusing split. It might seem like more
steps, but it is really the same amount of work. It is also simplier and
less complex.  I.e. instead of 4-5 one-line transactions, you have one 4-5
line split transaction.  It is a '6 of one, half a dozzen of the other'
situation.

>
> I will just delete the transaction and re-enter it and post back what
> I have then.
>
> Harold
>
> --- On Fri, 11/21/08, Mike or Penny Novack <[hidden email]> wrote:
> From: Mike or Penny Novack <[hidden email]>
> Subject: Re: Don't understand imbalance
> To: [hidden email]
> Cc: [hidden email]
> Date: Friday, November 21, 2008, 1:24 PM
>
> Harold wrote:
>
> > I don't record the credit card charges as I incur them. I don't
> use liabilities and then pay them. As I understand accounting (not very much) I
> am operating on a cash basis and therefore just pay the bills when then come in
> and are due.
> >
> Confusion as to what is meant by "cash basis". Concepts like
> "accounts receivable" and "accounts payable" aren't
> limited to "accrual bookkeeping".
>
> Perhaps the confusion is because you used the card for the purchase of physical
> goods of some sort? Try this example. Using your credit card, you go to an ATM
> and obtain money. You wouldn't think of this as if it were income, would
> you? Yes it's an increase in assets (cash in pocket) but it's also an
> increase in liabilities (credit card balance). When did you experience this
> increase in cash in pocket? When you took it from the ATM or when you later
> wrote a check to pay the credit card bill? It wasn't the same as if you
> waited to the date at which you later paid the bill, walked into the bank, and
> cashed a check was it?
>
> The same with the expense side. You buy something with the credit card instead
> of with cash from pocket or check from checking account. You bought it when you
> bought it, not later when you paid the bill. In between you owed somebody cash.
>
> Accrual bookkeeping is something else.
>
>
>
>      
> _______________________________________________
> gnucash-user mailing list
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> 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: Don't understand imbalance

Tim Wunder (Lists)
On Friday 21 November 2008 04:37:00 pm Robert Heller wrote:
> At Fri, 21 Nov 2008 13:15:36 -0800 (PST) [hidden email] wrote:
<snip>

I'm going to have to agree with Robert on this one. I used to handle the
credit card transaction like Harold, as one large split in an entry in my
checking account. I now have a Credit Card liability account where I enter
all the purchase transactions. They are simple credit/debit transactions to
the proper expense account (occasionally, I'll throw a split transaction in
there, but that's pretty rare). When I pay my credit card bill, it's a simple
credit/debit transaction in my Checking account, relieving the liability.
It is far easier and makes much more sense. No splits necessary, no
Imbalances.

Tim
--
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Re: Don't understand imbalance

houndhen
In reply to this post by Robert Heller
Thanks, Robert. Let's quit this thread. Even my head is hurting from confusion. I will have to do some reading from the manual about Gnucash. I have used QB for several years and have never used liabilities and accounts payable. Of course since I am more familiar with QB then splits don't seem to be as hard. New softwar means learning new ways of doing things.

Harold

--- On Fri, 11/21/08, Robert Heller <[hidden email]> wrote:
From: Robert Heller <[hidden email]>
Subject: Re: Don't understand imbalance
To: [hidden email]
Cc: [hidden email], [hidden email], "Robert Heller" <[hidden email]>
Date: Friday, November 21, 2008, 3:37 PM

At Fri, 21 Nov 2008 13:15:36 -0800 (PST) [hidden email] wrote:

>
> The way I have been doing it goes along with my thinking this way:
>
> I make several purchases with my credit card. This represents money
> from my bank account but it hasn't been taken out yet. When the bill
> comes in then I take the money from checking and pay the credit card
> bill and allocate the different purchases to the different expense
> accounts.

Actually is is NOT 'money from my bank account but it hasn't been taken
out yet', it is in fact money you *borrowed* from the credit card company.
And you did in fact 'spend it' when you bought the items in question.
Just because you pay off your balance every month it is no less an act
of borrowing.  The credit card company considers each transaction as a
separate transaction and should you ever decide to set up the on-line
banking interface (or simply start downloading OFX files from your
credit card company and/or bank, that is how it will look in the OFX
files.  Doing something else will only make things harder.

>
> I am not arguing and definitely am not an accountant, but I don't see
> the need to go through two more steps of posting the purchases in
> liabilities or accounts payable and then having to relieve those
> accounts. To me, my way cuts out a couple of unneeded steps for my home
> finances.

You are not really saving steps here, instead you are collecting them
together in a large, complex, and confusing split. It might seem like more
steps, but it is really the same amount of work. It is also simplier and
less complex.  I.e. instead of 4-5 one-line transactions, you have one 4-5
line split transaction.  It is a '6 of one, half a dozzen of the other'
situation.

>
> I will just delete the transaction and re-enter it and post back what
> I have then.
>
> Harold
>
> --- On Fri, 11/21/08, Mike or Penny Novack
<[hidden email]> wrote:
> From: Mike or Penny Novack <[hidden email]>
> Subject: Re: Don't understand imbalance
> To: [hidden email]
> Cc: [hidden email]
> Date: Friday, November 21, 2008, 1:24 PM
>
> Harold wrote:
>
> > I don't record the credit card charges as I incur them. I
don't
> use liabilities and then pay them. As I understand accounting (not very
much) I
> am operating on a cash basis and therefore just pay the bills when then
come in
> and are due.
> >
> Confusion as to what is meant by "cash basis". Concepts like
> "accounts receivable" and "accounts payable"
aren't
> limited to "accrual bookkeeping".
>
> Perhaps the confusion is because you used the card for the purchase of
physical
> goods of some sort? Try this example. Using your credit card, you go to an
ATM
> and obtain money. You wouldn't think of this as if it were income,
would
> you? Yes it's an increase in assets (cash in pocket) but it's also
an
> increase in liabilities (credit card balance). When did you experience
this
> increase in cash in pocket? When you took it from the ATM or when you
later
> wrote a check to pay the credit card bill? It wasn't the same as if
you
> waited to the date at which you later paid the bill, walked into the bank,
and
> cashed a check was it?
>
> The same with the expense side. You buy something with the credit card
instead
> of with cash from pocket or check from checking account. You bought it
when you
> bought it, not later when you paid the bill. In between you owed somebody
cash.

>
> Accrual bookkeeping is something else.
>
>
>
>      
> _______________________________________________
> 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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Deepwoods Software        -- Linux Installation and Administration
http://www.deepsoft.com/  -- Web Hosting, with CGI and Database
[hidden email]       -- Contract Programming: C/C++, Tcl/Tk
                                                           



     
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Re: Don't understand imbalance

houndhen
In reply to this post by Tim Wunder (Lists)
Thanks, Tim. Like I posted previously, I have some reading to do.

Harold

--- On Fri, 11/21/08, Tim Wunder <[hidden email]> wrote:
From: Tim Wunder <[hidden email]>
Subject: Re: Don't understand imbalance
To: [hidden email]
Date: Friday, November 21, 2008, 3:56 PM

On Friday 21 November 2008 04:37:00 pm Robert Heller wrote:
> At Fri, 21 Nov 2008 13:15:36 -0800 (PST) [hidden email] wrote:
<snip>

I'm going to have to agree with Robert on this one. I used to handle the
credit card transaction like Harold, as one large split in an entry in my
checking account. I now have a Credit Card liability account where I enter
all the purchase transactions. They are simple credit/debit transactions to
the proper expense account (occasionally, I'll throw a split transaction in

there, but that's pretty rare). When I pay my credit card bill, it's a
simple
credit/debit transaction in my Checking account, relieving the liability.
It is far easier and makes much more sense. No splits necessary, no
Imbalances.

Tim
--
Fedora Core release 6 (Zod), Linux 2.6.22.14-72.fc6
KDE: 3.5.8-1 Fedora
 16:45:01 up 32 days,  8:22,  2 users,  load average: 0.40, 0.48, 0.37
"It's what you learn after you know it all that counts" John
Wooden
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