how to automatically update equity account as each transaction is entered?

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how to automatically update equity account as each transaction is entered?

Francis Gerund
Hello!

Yes, I am aware that this issue has come up before, but it really bothers
me, so . . .


Start with this:

Assets:       $0.00
Liabilities:  $0.00
Equity:       $0.00
Income:       $0.00
Expenses:     $0.00


Now, you find $1.00. So now,

Assets:       $1.00
Liabilities:  $0.00
Equity:       $1.00
Income:       $0.00
Expenses:     $0.00


Right?
WRONG - according to GnuCash 2.6.12 !!  It stubbornly shows:

Assets:       $1.00
Liabilities:  $0.00
Equity:       $0.00
Income:       $0.00
Expenses:     $0.00


To me, Equity has always been (and always will be) simply the calculated
result of
"Assets - Liabilities = Equity".
That is, "Equity" is just another name for "Net Worth".

I don't want to have to look up a balance sheet report just to check the
Equity amount.
After all, the Equity is (literally) the bottom line, and as they say, "the
bottom line IS the bottom line".
I don't have to do that to get the Asset amount, so why should I have to do
so to get the Equity amount?

So, is there a way to AUTOMATICALLY get GnuCash to show the Equity amount
in the "Accounts" window (or tab),
up to date after each transaction is entered?

Thank you for any information on this!
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Re: how to automatically update equity account as each transaction is entered?

David Cousens
Hi Francis,
While Assets - Liabilities = Equity  is generally true in accounting it is implemented in a slightly different form as follows.
Assets = Liabilities + Equity + (Income - Expenses).

Assets , Liabilities and Equity accounts are normally referred to as the permanent accounts because their balances carry over beyond the current accounting period, i.e. from past years to present year to future years if using an annual accounting period

Income and Expenses are actually temporary Equity accounts. At the end of the current period, they are normally closed( i.e. their balances are transferred) to an Equity:Retained Earnings account.

In the transaction you have described the $1 will be debited to the asset account and the credit side of the transaction will be to an Income account e.g. Income:MoneyFound. When you enter the transaction assuming you do it from the Asset account register window, if you click on a new line , enter the transaction date, enter a comment in the Memo field about the transaction and then press <TAB> a new line will open up. By default the Account in the Account field will be your Asset account (e.g. usually a bank account or an account for handling undeposited funds ). If you enter $1.00 in the debit column and hit <TAB> again a second new line will open up. If you click in the Account field in this line a symbol like a rounded square with a minus sign appears. Click on that to get a dropdown list of all your accounts and select your Income ( or an appropriate sub account of Income). By default the $1.00 will appear in the Credit column.Your transaction should consist of three lines, the top line showing a debit of $1 and the balance of the Asset account. The second and third line show the split of the transaction, i.e. the debit and credit entries and the accounts which each of these components of the transaction affects. Hit Enter and the information is recorded. If you click on the new line or any other transaction in that account, the split should close and you will get what was displayed on the top line with the Income Account displayed in the account column indicating the other account affected by the corresponding credit part of the transaction along with your Asset account.

All transactions consist of one or more debit entries and one or more credit entries where the sum of the debit entries equals the sum of the credit entries for that transaction.  I would read the documentation section on entering transactions and possibly read the Wikipedia article on double entry book keeping/ accounting .  

The process for spending money is similar but now your asset account is credited by the amount of the transaction and an expense account is debited by the transaction amount. Transactions may affect  more than two accounts for example where a GST or VAT tax applies. I would get the basic concepts and operations working on two accounts and read the documentation on splits before attempting more complex transactions.
Good luck
David
David Cousens
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Re: how to automatically update equity account as each transaction is entered?

Derek Atkins
In reply to this post by Francis Gerund
Hi,

Francis Gerund <[hidden email]> writes:

> Hello!
>
> Yes, I am aware that this issue has come up before, but it really bothers
> me, so . . .

[snip]

> Now, you find $1.00. So now,
>
> Assets:       $1.00
> Liabilities:  $0.00
> Equity:       $1.00
> Income:       $0.00
> Expenses:     $0.00
>
>
> Right?

That's one approach.

> WRONG - according to GnuCash 2.6.12 !!  It stubbornly shows:
>
> Assets:       $1.00
> Liabilities:  $0.00
> Equity:       $0.00
> Income:       $0.00
> Expenses:     $0.00

This implies you have mis-entered your transaction.  The $1 debit to
Assets needs to be balanced with a $1 credit from SOMEWHERE.  But you
clearly didn't do that.  That $1 credit could come from Income, Equity,
or even a Liability.  You have done none of those, so this *IS* wrong.

> To me, Equity has always been (and always will be) simply the calculated
> result of
> "Assets - Liabilities = Equity".
> That is, "Equity" is just another name for "Net Worth".
>
> I don't want to have to look up a balance sheet report just to check the
> Equity amount.

Sorry, but the "Equity Accounts" only show your equity at a specific
point in time.  That specific point is either:

a) when you started accounting or
b) when you close the books

In order to see the Instantaneous Equity you *MUST* look at your
reports.  This is because Income and Expense accounts are considered
Temporary Equity accounts, and they hold the changes to equity since the
last Point-In-Time Equity balance (see above).

> After all, the Equity is (literally) the bottom line, and as they say, "the
> bottom line IS the bottom line".
> I don't have to do that to get the Asset amount, so why should I have to do
> so to get the Equity amount?

See above.  Income/Expense are also Equity accounts.

> So, is there a way to AUTOMATICALLY get GnuCash to show the Equity amount
> in the "Accounts" window (or tab),
> up to date after each transaction is entered?

No.  And there never will be.

> Thank you for any information on this!

> Please remember to CC this list on all your replies.
> You can do this by using Reply-To-List or Reply-All.

-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: how to automatically update equity account as each transaction is entered?

Francis Gerund
Thanks David and Derek for the replies.

So the short answer is no.  That's sort of what I thought.

I guess it's been too long since I took any accounting classes.

And unfortunately, accounting isn't like science, etc. - you can't just
"think your way through it".  It is internally consistent, but not
necessarily rational; it is just whatever the GAAP say it is.  (That
according to an accounting professor, many years ago).

Thanks anyway!


On Mon, Apr 11, 2016 at 10:33 AM, Derek Atkins <[hidden email]> wrote:

> Hi,
>
> Francis Gerund <[hidden email]> writes:
>
> > Hello!
> >
> > Yes, I am aware that this issue has come up before, but it really bothers
> > me, so . . .
>
> [snip]
>
> > Now, you find $1.00. So now,
> >
> > Assets:       $1.00
> > Liabilities:  $0.00
> > Equity:       $1.00
> > Income:       $0.00
> > Expenses:     $0.00
> >
> >
> > Right?
>
> That's one approach.
>
> > WRONG - according to GnuCash 2.6.12 !!  It stubbornly shows:
> >
> > Assets:       $1.00
> > Liabilities:  $0.00
> > Equity:       $0.00
> > Income:       $0.00
> > Expenses:     $0.00
>
> This implies you have mis-entered your transaction.  The $1 debit to
> Assets needs to be balanced with a $1 credit from SOMEWHERE.  But you
> clearly didn't do that.  That $1 credit could come from Income, Equity,
> or even a Liability.  You have done none of those, so this *IS* wrong.
>
> > To me, Equity has always been (and always will be) simply the calculated
> > result of
> > "Assets - Liabilities = Equity".
> > That is, "Equity" is just another name for "Net Worth".
> >
> > I don't want to have to look up a balance sheet report just to check the
> > Equity amount.
>
> Sorry, but the "Equity Accounts" only show your equity at a specific
> point in time.  That specific point is either:
>
> a) when you started accounting or
> b) when you close the books
>
> In order to see the Instantaneous Equity you *MUST* look at your
> reports.  This is because Income and Expense accounts are considered
> Temporary Equity accounts, and they hold the changes to equity since the
> last Point-In-Time Equity balance (see above).
>
> > After all, the Equity is (literally) the bottom line, and as they say,
> "the
> > bottom line IS the bottom line".
> > I don't have to do that to get the Asset amount, so why should I have to
> do
> > so to get the Equity amount?
>
> See above.  Income/Expense are also Equity accounts.
>
> > So, is there a way to AUTOMATICALLY get GnuCash to show the Equity amount
> > in the "Accounts" window (or tab),
> > up to date after each transaction is entered?
>
> No.  And there never will be.
>
> > Thank you for any information on this!
>
> > Please remember to CC this list on all your replies.
> > You can do this by using Reply-To-List or Reply-All.
>
> -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: how to automatically update equity account as each transaction is entered?

David Cousens
Hi Francis,

I don't think accounting is irrational. As a device purely created by us to handle another creation of ours ( money and finances) the GAAP is a highly rational system, it just has no immutable laws of nature that we can appeal to constrain  the practice  ( I am both a physicist and an accountant so I have a foot in both camps there).  I am not so sure that one can think ones way through science. Aristotle tried that and held up the progress of science for a considerable period before it became apparent some of his thinking was highly flawed.

There are probably many ways in practice that you can achieve the same result as the double entry accounting system that Gnucash implements. My feeling is that it has become the standard in accounting practice because it implements various checks on the accuracy and consistency of the recorded data which were present in manual ledger recording of financial data that make errors in data entry easier to locate. Gnucash has a number of features which improve on the basic double entry system.  Your $1 debit to the Asset account if an income or other account had not been selected would have appeared in a default account Imbalance created by Gnucash. Any non zero balance in this account likely indicates an incorrect entry and the source of that entry can be traced form the Imbalance account.

That is not to say it cannot be improved, but any improvements in double entry accounting will be incremental and at least for business non-profit  and government organisational use the creation of the IASB has possibly made any improvement process a bit cumbersome. Against that, we should be able to easily understand and interpret any set of accounts which are maintained in accordance with IASB standards from anywhere in the world at a basic level (at least in principle).

In a way what you have asked for does happen (although not automatically) but to get the current  net worth  you have to take the Equity balances at the last closure and add the current Profit ( Income to date minus the Expenses to date).  It is likely that you could customize one of the standard reports to do just that by combining the Equity portion of  a Balance report with a Profit and Loss Report.  

It is almost impossible to automate the selection of the account for the second half of a  transaction in general though, as it depends upon the nature of the specific transaction ( credit notes and similar are exceptions from simple purchase expenditure transaction)  that is being recorded and most people want to break down their income  and expenses into specific categories and Gnucash has no way of knowing what level of detail is important to a specific user. The business features do address this to some extent for specific types of transactions.

I find the flexibility of Gnucash its most important feature. If the treatment of a specific transaction type is not specifically implemented, you can create the necessary transaction components to achieve it as long as you know what you are doing in the accounting sense. The business features of Gnucash have developed appreciably in the time I have been using Gnucash I think mainly as a result of Derek's efforts.
David Cousens
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Re: how to automatically update equity account as each transaction is entered?

Dean Gibson-3
On 2016-04-11 19:47, DaveC49 wrote:
> Hi Francis,
>
> I don't think accounting is irrational ...

I agree.

> ... it just has no immutable laws of nature that we can appeal
> to constrain the practice ...

Only one:  Since accounting tracks where items of value (eg, money,
assets, liabilities) has come from (credits), and gone to (debits), the
sum must always be zero.  My accounting knowledge is entirely
self-taught, and I have found the following model helpful:

I view double-entry accounting as a small one-room house with five
windows, where items of value come in one window and out the other.
Anytime something crosses a window threshold, it is recorded.  Since
nothing ever stays in the one-room house, the balance of debits and
credits is always equal (eg, sums to zero).  I don't view this so much
as a check on the accuracy of the system, but rather a way of tracking
the purpose of all transactions.

Where accounting gets complicated, is in philosophical decisions about
that purpose:  Eg, is the purchase of an item an expense or an asset?  
That's the hard part to learn;  the math is easy. :)  I tend to be
pedantic about some of it, because that helps me learn.  Eg, when I
record income received, I enter the income tax withheld as an asset
(that the Federal Gov't holds for me), and then adjust that when I
compute my actual tax owed each year.  Ie, it's not an expense until you
know how much it is.  Of course, I could just record each withholding as
an expense, and then adjust it when the actual tax is computed, but I
like the view of the pre-paid tax balance as a running asset.

> ...  I am not so sure that one can think ones
> way through science. Aristotle tried that and ...

In the same way, I often see accounting newcomers try to shoe-horn
GnuCash (and occasionally, accounting principles) into their accounting
needs.  That's almost always a disaster that comes back to visit them
later in an audit (their own, their organization's, or the
government's).  Millions of people around the world have refined AND
AGREED ON an accounting "philosophy" that's based on plenty of
experience and wisdom, and bucking the trend is usually a waste of
time.  Accounting (as used by most people) is not going to change.

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Re: how to automatically update equity account as each transaction is entered?

Francis Gerund
On Tue, Apr 12, 2016 at 12:49 AM, Dean Gibson <[hidden email]>
wrote:

> On 2016-04-11 19:47, DaveC49 wrote:
>
>> Hi Francis,
>>
>> I don't think accounting is irrational ...
>>
>
> I agree.
>
> ... it just has no immutable laws of nature that we can appeal
>> to constrain the practice ...
>>
>
> Only one:  Since accounting tracks where items of value (eg, money,
> assets, liabilities) has come from (credits), and gone to (debits), the sum
> must always be zero.  My accounting knowledge is entirely self-taught, and
> I have found the following model helpful:
>
> I view double-entry accounting as a small one-room house with five
> windows, where items of value come in one window and out the other. Anytime
> something crosses a window threshold, it is recorded.  Since nothing ever
> stays in the one-room house, the balance of debits and credits is always
> equal (eg, sums to zero).  I don't view this so much as a check on the
> accuracy of the system, but rather a way of tracking the purpose of all
> transactions.
>
> Where accounting gets complicated, is in philosophical decisions about
> that purpose:  Eg, is the purchase of an item an expense or an asset?
> That's the hard part to learn;  the math is easy. :)  I tend to be pedantic
> about some of it, because that helps me learn.  Eg, when I record income
> received, I enter the income tax withheld as an asset (that the Federal
> Gov't holds for me), and then adjust that when I compute my actual tax owed
> each year.  Ie, it's not an expense until you know how much it is.  Of
> course, I could just record each withholding as an expense, and then adjust
> it when the actual tax is computed, but I like the view of the pre-paid tax
> balance as a running asset.
>
> ...  I am not so sure that one can think ones
>> way through science. Aristotle tried that and ...
>>
>
> In the same way, I often see accounting newcomers try to shoe-horn GnuCash
> (and occasionally, accounting principles) into their accounting needs.
> That's almost always a disaster that comes back to visit them later in an
> audit (their own, their organization's, or the government's).  Millions of
> people around the world have refined AND AGREED ON an accounting
> "philosophy" that's based on plenty of experience and wisdom, and bucking
> the trend is usually a waste of time.  Accounting (as used by most people)
> is not going to change.
>
>
> _______________________________________________
> 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.
>




Dean Gibson wrote:

----------------------------------------------------------------------------------------------------

"In the same way, I often see accounting newcomers try to shoe-horn GnuCash
(and occasionally, accounting principles) into their accounting needs.
That's almost always a disaster that comes back to visit them later in an
audit (their own, their organization's, or the government's).  Millions of
people around the world have refined AND AGREED ON an accounting
"philosophy" that's based on plenty of experience and wisdom, and bucking
the trend is usually a waste of time.  Accounting (as used by most people)
is not going to change."

----------------------------------------------------------------------------------------------------

Thanks for your input.  I do not disagree with your statement.  I do not
want to stretch out this thread any further,
but I just have to say:

1)  As has been noted, double-entry accounting was devised centuries ago,
to reduce human data errors, in a time when a "computer" was a human that
could do arithmetic computations.

2)  It was a great advance for its time, but so was the horse-drawn plow.
Although both technically still "work", both may be increasingly obsolete.

I do think that, if we can put people on the moon (multiple times) and
return them to Earth safely, we can surely come up with something better
than double-entry accounting, if we put our mind to it.

Something easier.
Something simpler.
Something less complex.
Something useful to all, not just the few.
Something less tedious and cumbersome.
Something more intuitive and accessible to the numerically challenged.
Something that did not require long, agonizing formal or at least informal
study to learn.

WE DESERVE BETTER!

Thank you all for your patience and indulgence.
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Re: how to automatically update equity account as each transaction is entered?

Michael Wagner-2
In reply to this post by Francis Gerund
>
> ---------- Forwarded message ----------
> From: Francis Gerund <[hidden email]>
> To: [hidden email]
> Cc:
> Date: Tue, 12 Apr 2016 20:30:15 -0400
> Subject: Re: how to automatically update equity account as each
> transaction is entered?
> On Tue, Apr 12, 2016 at 12:49 AM, Dean Gibson <[hidden email]>
> wrote:
>
> > On 2016-04-11 19:47, DaveC49 wrote:
> >
> >> Hi Francis,
> >>
> >> I don't think accounting is irrational ...
> >>
> >
> > I agree.
> >
> > ... it just has no immutable laws of nature that we can appeal
> >> to constrain the practice ...
> >>
> >
> > Only one:  Since accounting tracks where items of value (eg, money,
> > assets, liabilities) has come from (credits), and gone to (debits), the
> sum
> > must always be zero.  My accounting knowledge is entirely self-taught,
> and
> > I have found the following model helpful:
> >
> > I view double-entry accounting as a small one-room house with five
> > windows, where items of value come in one window and out the other.
> Anytime
> > something crosses a window threshold, it is recorded.  Since nothing ever
> > stays in the one-room house, the balance of debits and credits is always
> > equal (eg, sums to zero).  I don't view this so much as a check on the
> > accuracy of the system, but rather a way of tracking the purpose of all
> > transactions.
> >
> > Where accounting gets complicated, is in philosophical decisions about
> > that purpose:  Eg, is the purchase of an item an expense or an asset?
> > That's the hard part to learn;  the math is easy. :)  I tend to be
> pedantic
> > about some of it, because that helps me learn.  Eg, when I record income
> > received, I enter the income tax withheld as an asset (that the Federal
> > Gov't holds for me), and then adjust that when I compute my actual tax
> owed
> > each year.  Ie, it's not an expense until you know how much it is.  Of
> > course, I could just record each withholding as an expense, and then
> adjust
> > it when the actual tax is computed, but I like the view of the pre-paid
> tax
> > balance as a running asset.
> >
> > ...  I am not so sure that one can think ones
> >> way through science. Aristotle tried that and ...
> >>
> >
> > In the same way, I often see accounting newcomers try to shoe-horn
> GnuCash
> > (and occasionally, accounting principles) into their accounting needs.
> > That's almost always a disaster that comes back to visit them later in an
> > audit (their own, their organization's, or the government's).  Millions
> of
> > people around the world have refined AND AGREED ON an accounting
> > "philosophy" that's based on plenty of experience and wisdom, and bucking
> > the trend is usually a waste of time.  Accounting (as used by most
> people)
> > is not going to change.
> >
> >
> > _______________________________________________
> > 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.
> >
>
>
> Thanks for your input.  I do not disagree with your statement.  I do not
> want to stretch out this thread any further,
> but I just have to say:
>
> 1)  As has been noted, double-entry accounting was devised centuries ago,
> to reduce human data errors, in a time when a "computer" was a human that
> could do arithmetic computations.
>
> 2)  It was a great advance for its time, but so was the horse-drawn plow.
> Although both technically still "work", both may be increasingly obsolete.
>
> I do think that, if we can put people on the moon (multiple times) and
> return them to Earth safely, we can surely come up with something better
> than double-entry accounting, if we put our mind to it.
>
> Something easier.
> Something simpler.
> Something less complex.
> Something useful to all, not just the few.
> Something less tedious and cumbersome.
> Something more intuitive and accessible to the numerically challenged.
> Something that did not require long, agonizing formal or at least informal
> study to learn.
>
> WE DESERVE BETTER!
>
> Thank you all for your patience and indulgence.
>
>
I have to tell you that - as a complete neophyte who learned something
about double entry bookkeeping to be able to use gncash a year ago - I am
pretty amazed at the ease simplicity, and elegance of double entry
bookkeeping.

To my mind, the computer (mediated by the gnucash developers) relieves all
the tedium and handle my numerical challenges.

The hardest thing for me was to let go of the political definition of
"debit" as "debt, something bad".

Here's the way I think of, and it's really the simplest algebra:

Assets = Liabilities + Equiity

Equity = Capital + Income - Expenses

Since no one invested (financially) in me, for me:

Assets = Liabilities + (Income - Expenses)

Now I add Expenses to both sides - that's the only algebra required:

Assets + Expenses = Liabilities + Income

The hard part is just letting go of my intuitive definition of "debit" as
"debt, something bad". If I look at the equation and think "everything on
the left side of equation is increased by a debut, and everything on the
right side of the equation is increased by a credit", I'm done. That's all
the "long, agonizing formal or at least informal study" to use gnuscash
(and I don't think that I really even needed to know that).

I will grant you that applying those concepts in more advanced transactions
might be conceptually challenging. But it makes sense to me that if I was
accounting for more advances transactions, I might be motivated to learn a
little more.

The problem that made me understand the elegance and simplicity of double
entry bookkeeping was a pretty simple problem: like a lot of people (in the
US), I have a tax advantaged account called a "529 plan" that I use to save
for my daughter's education. Since she was born, I have written checks to
the 529 plan, and now that she's in college, I take transfer money from the
529 plan to my checking account, and write out a check for her college.

Believe it or not, it's pretty hard to capture that flow in Quicken - or
even in a spreadsheet. I've tried. The core of flow is that money is really
moving from my checking account to educational expenses - the 529 plan is
in essence only an intermediary.

With double entry bookkeeping, it's simple, elegant and crystal clear.
Forget which is a debit and which is a credit right now - gnucash worries
about that.

1) "Write a check to the 529 plan" means "Decrease checking account balance
- Increase 529 plan balance."
2) "Transfer money from the 529 plan to my checking account" means
 "Increase checking account balance, decrease 529 plan balance."
3) "Write out check to college" means " "Decrease checking account balance,
increase educational expenses balance."

This seems to me to be amazingly simple and elegant. Trying to trace the
money flow with something like Quicken which really just decorates deposits
and withdrawals with "categories" is hard - it doesn't preserve the
relationships between the accounts.

As a non-accountant, I am pretty amazed at the simplicity and elegance of
double entry bookkeeping.

Mike

--
“The bassoon is one of my favorite instruments. It has a medieval aroma,
like the days when everything used to sound like that. Some people crave
baseball...I find this unfathomable, but I can easily understand why a
person could get excited about playing the bassoon.” - Frank Zappa
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Re: how to automatically update equity account as each transaction is entered?

Francis Gerund
On Wed, Apr 13, 2016 at 12:45 PM, Michael Wagner <
[hidden email]> wrote:

> >
> > ---------- Forwarded message ----------
> > From: Francis Gerund <[hidden email]>
> > To: [hidden email]
> > Cc:
> > Date: Tue, 12 Apr 2016 20:30:15 -0400
> > Subject: Re: how to automatically update equity account as each
> > transaction is entered?
> > On Tue, Apr 12, 2016 at 12:49 AM, Dean Gibson <[hidden email]
> >
> > wrote:
> >
> > > On 2016-04-11 19:47, DaveC49 wrote:
> > >
> > >> Hi Francis,
> > >>
> > >> I don't think accounting is irrational ...
> > >>
> > >
> > > I agree.
> > >
> > > ... it just has no immutable laws of nature that we can appeal
> > >> to constrain the practice ...
> > >>
> > >
> > > Only one:  Since accounting tracks where items of value (eg, money,
> > > assets, liabilities) has come from (credits), and gone to (debits), the
> > sum
> > > must always be zero.  My accounting knowledge is entirely self-taught,
> > and
> > > I have found the following model helpful:
> > >
> > > I view double-entry accounting as a small one-room house with five
> > > windows, where items of value come in one window and out the other.
> > Anytime
> > > something crosses a window threshold, it is recorded.  Since nothing
> ever
> > > stays in the one-room house, the balance of debits and credits is
> always
> > > equal (eg, sums to zero).  I don't view this so much as a check on the
> > > accuracy of the system, but rather a way of tracking the purpose of all
> > > transactions.
> > >
> > > Where accounting gets complicated, is in philosophical decisions about
> > > that purpose:  Eg, is the purchase of an item an expense or an asset?
> > > That's the hard part to learn;  the math is easy. :)  I tend to be
> > pedantic
> > > about some of it, because that helps me learn.  Eg, when I record
> income
> > > received, I enter the income tax withheld as an asset (that the Federal
> > > Gov't holds for me), and then adjust that when I compute my actual tax
> > owed
> > > each year.  Ie, it's not an expense until you know how much it is.  Of
> > > course, I could just record each withholding as an expense, and then
> > adjust
> > > it when the actual tax is computed, but I like the view of the pre-paid
> > tax
> > > balance as a running asset.
> > >
> > > ...  I am not so sure that one can think ones
> > >> way through science. Aristotle tried that and ...
> > >>
> > >
> > > In the same way, I often see accounting newcomers try to shoe-horn
> > GnuCash
> > > (and occasionally, accounting principles) into their accounting needs.
> > > That's almost always a disaster that comes back to visit them later in
> an
> > > audit (their own, their organization's, or the government's).  Millions
> > of
> > > people around the world have refined AND AGREED ON an accounting
> > > "philosophy" that's based on plenty of experience and wisdom, and
> bucking
> > > the trend is usually a waste of time.  Accounting (as used by most
> > people)
> > > is not going to change.
> > >
> > >
> > > _______________________________________________
> > > 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.
> > >
> >
> >
> > Thanks for your input.  I do not disagree with your statement.  I do not
> > want to stretch out this thread any further,
> > but I just have to say:
> >
> > 1)  As has been noted, double-entry accounting was devised centuries ago,
> > to reduce human data errors, in a time when a "computer" was a human that
> > could do arithmetic computations.
> >
> > 2)  It was a great advance for its time, but so was the horse-drawn plow.
> > Although both technically still "work", both may be increasingly
> obsolete.
> >
> > I do think that, if we can put people on the moon (multiple times) and
> > return them to Earth safely, we can surely come up with something better
> > than double-entry accounting, if we put our mind to it.
> >
> > Something easier.
> > Something simpler.
> > Something less complex.
> > Something useful to all, not just the few.
> > Something less tedious and cumbersome.
> > Something more intuitive and accessible to the numerically challenged.
> > Something that did not require long, agonizing formal or at least
> informal
> > study to learn.
> >
> > WE DESERVE BETTER!
> >
> > Thank you all for your patience and indulgence.
> >
> >
> I have to tell you that - as a complete neophyte who learned something
> about double entry bookkeeping to be able to use gncash a year ago - I am
> pretty amazed at the ease simplicity, and elegance of double entry
> bookkeeping.
>
> To my mind, the computer (mediated by the gnucash developers) relieves all
> the tedium and handle my numerical challenges.
>
> The hardest thing for me was to let go of the political definition of
> "debit" as "debt, something bad".
>
> Here's the way I think of, and it's really the simplest algebra:
>
> Assets = Liabilities + Equiity
>
> Equity = Capital + Income - Expenses
>
> Since no one invested (financially) in me, for me:
>
> Assets = Liabilities + (Income - Expenses)
>
> Now I add Expenses to both sides - that's the only algebra required:
>
> Assets + Expenses = Liabilities + Income
>
> The hard part is just letting go of my intuitive definition of "debit" as
> "debt, something bad". If I look at the equation and think "everything on
> the left side of equation is increased by a debut, and everything on the
> right side of the equation is increased by a credit", I'm done. That's all
> the "long, agonizing formal or at least informal study" to use gnuscash
> (and I don't think that I really even needed to know that).
>
> I will grant you that applying those concepts in more advanced transactions
> might be conceptually challenging. But it makes sense to me that if I was
> accounting for more advances transactions, I might be motivated to learn a
> little more.
>
> The problem that made me understand the elegance and simplicity of double
> entry bookkeeping was a pretty simple problem: like a lot of people (in the
> US), I have a tax advantaged account called a "529 plan" that I use to save
> for my daughter's education. Since she was born, I have written checks to
> the 529 plan, and now that she's in college, I take transfer money from the
> 529 plan to my checking account, and write out a check for her college.
>
> Believe it or not, it's pretty hard to capture that flow in Quicken - or
> even in a spreadsheet. I've tried. The core of flow is that money is really
> moving from my checking account to educational expenses - the 529 plan is
> in essence only an intermediary.
>
> With double entry bookkeeping, it's simple, elegant and crystal clear.
> Forget which is a debit and which is a credit right now - gnucash worries
> about that.
>
> 1) "Write a check to the 529 plan" means "Decrease checking account balance
> - Increase 529 plan balance."
> 2) "Transfer money from the 529 plan to my checking account" means
>  "Increase checking account balance, decrease 529 plan balance."
> 3) "Write out check to college" means " "Decrease checking account balance,
> increase educational expenses balance."
>
> This seems to me to be amazingly simple and elegant. Trying to trace the
> money flow with something like Quicken which really just decorates deposits
> and withdrawals with "categories" is hard - it doesn't preserve the
> relationships between the accounts.
>
> As a non-accountant, I am pretty amazed at the simplicity and elegance of
> double entry bookkeeping.
>
> Mike
>
> --
> “The bassoon is one of my favorite instruments. It has a medieval aroma,
> like the days when everything used to sound like that. Some people crave
> baseball...I find this unfathomable, but I can easily understand why a
> person could get excited about playing the bassoon.” - Frank Zappa
> _______________________________________________
> 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.
>




Michael, thank you for your reply.

Now I guess I just have to find the time and energy to learn double-entry
accounting, and to do so in a dialect that GnuCash would allow.

BTW, for me the GnuCash documentation just doesn't seem to get the job
done.  Nice try, but . . .
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Re: how to automatically update equity account as each transaction is entered?

Geert Janssens-4
On Wednesday 13 April 2016 19:02:33 Francis Gerund wrote:
>
> Michael, thank you for your reply.
>
> Now I guess I just have to find the time and energy to learn
> double-entry accounting, and to do so in a dialect that GnuCash would
> allow.
>
> BTW, for me the GnuCash documentation just doesn't seem to get the job
> done.  Nice try, but . . .

As this is a volunteer project, you are welcome to suggest improvements to the
documentation via our bug tracker or - even better - become a volunteer
yourself and and help write some missing parts.

Regards,

Geert
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Re: how to automatically update equity account as each transaction is entered?

Michael Wagner
In reply to this post by Francis Gerund

> Michael, thank you for your reply.
>
> Now I guess I just have to find the time and energy to learn double-entry
> accounting, and to do so in a dialect that GnuCash would allow.
>
> BTW, for me the GnuCash documentation just doesn't seem to get the job
> done.  Nice try, but . . .
>
I learned that stuff because I wanted to, not because I needed it to use gnucash. At least for me, the concepts got a lot clearer as I used gnucash. The columns in the serious accounts are named the way I'd expect (i.e., something like "deposit" and "withdrawal" for a checking account) - you don't necessarily know which is a debit and which is a credit. For example, it happens that the "deposit" column got a checking account is on the left, and the "withdrawals" are the right - that makes "deposits" debits and "withdrawals" credits, but I didn't need to know that.

When/if gnucash did something that surprised me, I assumed that gnucash developers understood accounting better than I did. So I'd draw little boxes and try to understand what was going on.

Within a couple of months, I seemed to understand everything that I needed to understand about double entry bookkeeping for my limited purposes.

I found the combination of reading a little and using gnucash a lot brought me up to speed pretty painlessly.

Mike
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Re: how to automatically update equity account as each transaction is entered?

Francis Gerund
On Thu, Apr 14, 2016 at 11:30 AM, Michael Wagner <[hidden email]>
wrote:

>
> > Michael, thank you for your reply.
> >
> > Now I guess I just have to find the time and energy to learn double-entry
> > accounting, and to do so in a dialect that GnuCash would allow.
> >
> > BTW, for me the GnuCash documentation just doesn't seem to get the job
> > done.  Nice try, but . . .
> >
> I learned that stuff because I wanted to, not because I needed it to use
> gnucash. At least for me, the concepts got a lot clearer as I used gnucash.
> The columns in the serious accounts are named the way I'd expect (i.e.,
> something like "deposit" and "withdrawal" for a checking account) - you
> don't necessarily know which is a debit and which is a credit. For example,
> it happens that the "deposit" column got a checking account is on the left,
> and the "withdrawals" are the right - that makes "deposits" debits and
> "withdrawals" credits, but I didn't need to know that.
>
> When/if gnucash did something that surprised me, I assumed that gnucash
> developers understood accounting better than I did. So I'd draw little
> boxes and try to understand what was going on.
>
> Within a couple of months, I seemed to understand everything that I needed
> to understand about double entry bookkeeping for my limited purposes.
>
> I found the combination of reading a little and using gnucash a lot
> brought me up to speed pretty painlessly.
>
> Mike




Geert,
Sorry, but I could not even begin to "suggest improvements to the
documentation", or "help write some missing parts".  One has to learn
something first, before trying to teach it to others.

Michael,
I am thinking maybe I should just forget GnuCash for now, and just try to
re-learn what accounting I did know years ago, the way I learned it then:
by using paper ledger pads - the kind you can still get at office supply
stores.  Agonizingly tedious, but at least the ledger pads won't argue with
the accounting books (with me in the middle)!
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Re: how to automatically update equity account as each transaction is entered?

Tommy Trussell
On Mon, Apr 18, 2016 at 9:00 PM, Francis Gerund <[hidden email]> wrote:

>
> Geert,
> Sorry, but I could not even begin to "suggest improvements to the
> documentation", or "help write some missing parts".  One has to learn
> something first, before trying to teach it to others.
>
> Michael,
> I am thinking maybe I should just forget GnuCash for now, and just try to
> re-learn what accounting I did know years ago, the way I learned it then:
> by using paper ledger pads - the kind you can still get at office supply
> stores.  Agonizingly tedious, but at least the ledger pads won't argue with
> the accounting books (with me in the middle)!
>


You may be presuming that any documentation you write would be used to
teach someone the correct way to use GnuCash, but given your experience,
maybe you might consider keeping a journal about how things went awry! If
you consider it a story about a journey to learn, maybe that mindset would
help you and others. I know it might be helpful to folks as they consider
how to improve the software.

I think most of us who have never been trained in "proper" accounting might
benefit from more experiences of someone making a transition from paper
ledgers.

You might also benefit from reading the email list archives, because
beginner issues have been discussed numerous times; maybe you just haven't
yet seen any messages that related to your particular issues.

FURTHERMORE I hope you also haven't completely given up on the
documentation...

http://www.gnucash.org/docs.phtml

 -- some folks have misunderstood the distinction between the two manuals.

The Help Manual mostly contains the Help text that gets installed into the
application, so after some brief introductory text, most sections are
focused on individual pieces of the software and how to get specific tasks
completed, written assuming you are also looking at the screen trying to
get a task done.

The Tutorial and Concepts Guide gives an overview of the software, and
includes tutorials. By working through a few of the examples, many folks
have been able to get a better sense for what the software is doing. The
Concepts Guide also describes how the software supports general accounting
principles.

As you go through the documentation and try the software, if you keep a
journal of what worked and what didn't, your perspective might be useful to
anyone writing new documentation (or maybe even answering questions on the
list). If you found the examples irrelevant, that's important, too,
especially if you can also supply an example from your own ledgers.

As you can see from the documentation page, someone has also written a
book, sold through normal book vendors. It's several years old now, but
possibly you can inspect the free sample pages and see if maybe its
approach is more to your liking.
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Re: how to automatically update equity account as each transaction is entered?

Francis Gerund
Hi Tommy,

Thanks for the advice.  I'll keep it in mind.


On Tue, Apr 19, 2016 at 11:41 AM, Tommy Trussell <[hidden email]>
wrote:

>
> On Mon, Apr 18, 2016 at 9:00 PM, Francis Gerund <[hidden email]> wrote:
>
>>
>> Geert,
>> Sorry, but I could not even begin to "suggest improvements to the
>> documentation", or "help write some missing parts".  One has to learn
>> something first, before trying to teach it to others.
>>
>> Michael,
>> I am thinking maybe I should just forget GnuCash for now, and just try to
>> re-learn what accounting I did know years ago, the way I learned it then:
>> by using paper ledger pads - the kind you can still get at office supply
>> stores.  Agonizingly tedious, but at least the ledger pads won't argue
>> with
>> the accounting books (with me in the middle)!
>>
>
>
> You may be presuming that any documentation you write would be used to
> teach someone the correct way to use GnuCash, but given your experience,
> maybe you might consider keeping a journal about how things went awry! If
> you consider it a story about a journey to learn, maybe that mindset would
> help you and others. I know it might be helpful to folks as they consider
> how to improve the software.
>
> I think most of us who have never been trained in "proper" accounting
> might benefit from more experiences of someone making a transition from
> paper ledgers.
>
> You might also benefit from reading the email list archives, because
> beginner issues have been discussed numerous times; maybe you just haven't
> yet seen any messages that related to your particular issues.
>
> FURTHERMORE I hope you also haven't completely given up on the
> documentation...
>
> http://www.gnucash.org/docs.phtml
>
>  -- some folks have misunderstood the distinction between the two manuals.
>
> The Help Manual mostly contains the Help text that gets installed into the
> application, so after some brief introductory text, most sections are
> focused on individual pieces of the software and how to get specific tasks
> completed, written assuming you are also looking at the screen trying to
> get a task done.
>
> The Tutorial and Concepts Guide gives an overview of the software, and
> includes tutorials. By working through a few of the examples, many folks
> have been able to get a better sense for what the software is doing. The
> Concepts Guide also describes how the software supports general accounting
> principles.
>
> As you go through the documentation and try the software, if you keep a
> journal of what worked and what didn't, your perspective might be useful to
> anyone writing new documentation (or maybe even answering questions on the
> list). If you found the examples irrelevant, that's important, too,
> especially if you can also supply an example from your own ledgers.
>
> As you can see from the documentation page, someone has also written a
> book, sold through normal book vendors. It's several years old now, but
> possibly you can inspect the free sample pages and see if maybe its
> approach is more to your liking.
>
>
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Re: how to automatically update equity account as each transaction is entered?

Mike or Penny Novack-2
On 4/21/2016 4:12 PM, Francis Gerund wrote:

> Hi Tommy,
>
>
> Michael,
> I am thinking maybe I should just forget GnuCash for now, and just try to
> re-learn what accounting I did know years ago, the way I learned it then:
> by using paper ledger pads - the kind you can still get at office supply
> stores.  Agonizingly tedious, but at least the ledger pads won't argue
> with
> the accounting books (with me in the middle)!

Stop right there for a moment. IF you know how to do accounting the old
fashioned way, pen and ink on pads ruled for journal and ledger you
should have no trouble learning to use gnucash. For people with that
sort of background (but no experience using modern accounting package)
just need to have a slightly different description.

First: select the option that has "debit" and "credit" as the column
titles. That will be more familiar.

Second: It can help to visualize what gnucash (or a similar package) is
doing. It is "autoposting" and will let you enter the transaction
"backwards", first in the ledger (starting in any of the affected
accounts) and then gnucash creates the virtual journal entry. But for a
moment, imagine that it were the other way around,that  you entered the
transaction in the journal, hit enter, and poof, by magic posted for
you. Well you CAN select this view of what is going on. If you do that
......

Would be just like entering the transaction in the journal, but never
having to do the post to the ledger (automatic).

Remember, the default "view" is what the developers thought would be
easiest to teach people with NO previous bookkeeping experience. Those
with the old fashioned experience might learn how to use gnucash quicker
choosing a different "view"

Michael D Novack
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