Don, One of the reasons I started using GnuCash was to prepare assignments while doing a Master's in accounting 10 years ago. It's value then and now was it could be adapted fairly easily to a variety of needs and the transition to it from traditional accounting theory and T accounts was pretty smooth. While it didn't handle Cost Management Accounting or Inventory or Payroll within GnuCash, I was able to get through that using a combination of spreadsheets for calculations and transferring the results. OK for the toy exercises in a course program but possibly not so good for an operating business with serious needs in these areas and much greater volume. I do agree a proper formal Cash Flow Statement would be nice in the reports section.
David Cousens On Sat, 2020-07-25 at 06:47 -0600, doncram wrote: > Thanks Will, Jean, and John for your jumping in, and your many good points > in response to my posting. > > To Jean, yes, most important to me would be development of Job Costing, > because then many/most nonprofits could be served (which must be able to > track restricted grants) and both non-profits and for-profit businesses > could internally budget and track actuals for their projects/jobs. Job > Costing again is not needed for generating overall financial statements > (Balance Sheet, Income Statement (called Revenue less Expenses for > nonprofits), and Statement of Cash Flows), because only totals are reported > in most financial statements going externally. Maybe for that reason, many > persons are not aware of how crucial Job Costing is for many > organizations. You cannot expect the organizations to have one system just > for external reporting, and separate systems to track revenues and expenses > in different narrow areas for internal purposes and for specialized > purposes like reporting back to grant givers. And it is crucial for use in > teaching, in my opinion; it is definitely always included in the second of > two intro accounting courses that are required of all business majors in > any U.S. university or college. And second, lack of proper Statement of > Cash Flow reporting is another drawback of GnuCash, a serious one for > teaching purposes and also important in how practice should work. And > fixing these two gaps would address the biggest concerns I have, enough for > me to become comfortable to recommend GnuCash use in classes teaching > accounting, say (which is a very important threshold: is GnuCash good > enough to be incorporated into teaching/learning of accounting). I do have > two other major concern areas about GnuCash, which I think can be mostly > addressed by new documentation. Or by an informed teacher giving a course, > or by an informed consultant/coach to a small business or nonprofit > entrepreneur. Note I do not think "everything possible" must be done. For > two examples, I think GnuCash's lack of coverage of inventory is NOT a > serious problem, because inventory can be handled by a spreadsheet or > database, as is done in many businesses that have significant inventories, > instead of their using the available Quickbooks inventory stuff. > Quickbooks' treatment is not as good, in some serious ways, as what the > business does in their separate spreadsheet/database. Only summary journal > entries, based upon the spreadsheet detail, are needed in GnuCash. The > second example is that I am not concerned about GnuCash's lack of a fixed > assets module, i.e. for recognizing property plant & equipment purchases, > and depreciation thereof. These are my views about major areas needed or > not needed for GnuCash to be recommended/used in accounting courses. > > I like John's comments about cash management concerns. To Will, when you > receive a cash donation, I would think that should be taken directly to the > bank and deposited, so having a clear and auditable record is ensured, > rather than allowing it to go into a petty cash pot which is also used to > pay for expenses. At a fundraiser where lots of cash is received, there > can be a simple counting sheet provided which one or two others could use > to verify starting cash and ending cash. And then the ending cash is to be > deposited to the bank (and those witnesses to the counting could possibly > check to see that exactly that amount was deposited). That way all cash > receipts are auditable (e.g. potential donors can be sampled to ask what > amounts they donated), and there is little/less chance of any accident in > tracking, and there is more reason for others to trust the > treasurer/accountant. If only a debit card is used to pay for > expenditures, then there is clear record of everything outgoing, which is > auditable, too (show us the receipts). I dunno, if in your area you have > to use cash to make market purchases (do you really, would a debit charge > really not be accepted?), then at least the petty cash pot could be > one-way: supplied only by specific withdrawals from the bank, with > payments out documented by receipts. And that petty cash could be > inspected at any time, and selected receipts can be further checked to > verify that purchases claimed are matched by items now on hand, say. If > you mingle incoming and outgoing cash, it would be harder if not impossible > for auditing/inspection to be done, and easier for mistakes to be made, and > I think board members or others should question why the system not set up > differently. (This is partly about what Chart of Accounts makes sense, but > is not about GnuCash features in any way though.) > > Will's use of term "falsification" about any practice of using different > dates for recording transactions around the end of the year is kind of > alarming. I was trying to be descriptive of what I think actually happens > in an organization which has chosen to stay on a cash rather than accrual > basis. "Earnings management" of various kinds is common, in fact, as > proven by academic studies, and just as much in firms using accrual basis. > It is bad when there is any deception and any selfish interests potentially > being served (e.g. just enough change being made to allow a manager to earn > a contract bonus, for example). For BBG there is no selfish interest > possible, and I just saw it as a bookkeeper "tidying up" so that late bills > from December events would be recorded "where they should be", so the next > year's accounts should be cleanly started. Just like if they were able to > collect invoices and promptly pay the outstanding bills, really on December > 31. For a for-profit, where the timing of cash receipts and payments would > affect tax reporting, yes, that would not be allowable. I think, but now > am less sure, that nothing is wrong with a nonprofit doing that. Although > I myself would in fact use accrual accounting and set up APs and ARs. And > about Paypal, yeah it would be better, and is what I would do, to > explicitly show a Paypal account and its balance. (This also is not about > GnuCash features in any way.) > > Jean, yes the possible coverage of Job Costing has been discussed within > GnuCash development (including in big discussion located within a > long-standing bug report somewhere), but I don't think it has been properly > discussed out. What current or prospective teachers think, teachers who > could adopt use of GnuCash into courses and could greatly expand its usage > by different types of users over time, should matter a lot, IMO. I do > assume/believe that GnuCash programmers and other volunteers do want to > have a greater impact if possible, but I assume they naturally focus mostly > on serving the current users (which do not include anyone needing job > costing, besides some who need it but don't know they do). I dunno, would > it help if I wrote out my views about relative importance of various > changes, in one essay? > > Don > > On Sat, Jul 25, 2020 at 3:31 AM John G Sullivan <sullij_27...@att.net> > wrote: > > > When I saw this come up, I avoided jumping in since I'm not an accountant; > > however, I have been treasurer for a couple of nonprofits, including one > > which are subsidiary of a large nonprofit. > > > > a. the expectations of any software to fit most issues is high. The > > treasurer is almost always going to find specific needs which examples > > don't cover. I still don't understand how GnuCash developers manage to do > > as much with open source software. > > > > b. I've used QuickBooks, both stand alone and online and found it > > expensive, put too much 'under the covers' and designed for users for don't > > want to have to understand accounting. I also know treasurer's who use > > Quicken to do the job. If you spend the time you can have a very > > professional setup. > > > > c. 20 years ago I had access to the very top end professional accounting > > software. I found the ability to follow standard accounting rules, > > flexibility to provide reports excellent; however, cost is outside the > > 'ballpark' for most nonprofits. > > > > Consider the number of transactions, the total overall necessary balance > > sheet and income/expense accounts. If you don't have too much activity, you > > can do this with anything, including paper and pencil. The real turning > > point is when (in the US) you pass the 990 reporting thresholds and much > > document to your board and outsiders particular information. > > > > A few side notes: > > > > I consider cash on of the most vulnerable areas of a nonprofit. I took > > over one company where $1,000 was floating around in a wooden box and > > everyone had access to the box. I require collected cash be deposited > > immediately. Debit cards and reimbursed expenses are used for expense > > spending. > > > > I treat PayPal as a bank account. ( I don't have the account set where any > > purchase is immediately charged against my bank. However, I also have > > receipts which go to PayPal) > > > > John G Sullivan > > > > > > > > > > > > On 7/25/20, 2:00 AM, "gnucash-user on behalf of jean laroche" > > <gnucash-user-bounces+sullij_27615=att....@gnucash.org on behalf of > > rip...@gmail.com> wrote: > > > > Thanks for the very detailed analysis of Gnucash's shortcomings for > > nonprofits (and other businesses). > > I'm not an accountant either, barely a computer scientist. > > If I were to summarize the areas where GC falls short, it seems to me > > GC > > is missing: > > - Support for Job Costing > > - Cash Flow reporting isn't what it should be. > > > > Could the original poster (Don) confirm that these two features, if > > fixed/implemented would go a long way toward making GC more suited for > > nonprofits? > > > > Perhaps the developers (including me, in a modest manner) could then > > discuss whether these would be easy to add/fix. Perhaps these features > > have been discussed in the past? Job costing, in particular, may not > > be > > that hard to implement? The Cash Flow reporting might also not be too > > hard to fix, once the OP specifies exactly how it should be done, > > ideally. > > > > Jean > > > > > > On 7/24/2020 10:03 PM, w...@theprescotts.com wrote: > > > I have a few comments on this long post. I will preface it by > > admitting that I am neither a tax attorney nor an accountant. I have kept > > my personal accounts in GnuCash for many years. I am the treasurer for two > > non-profits, or more accurately, two subsidiaries of one non-profit. But > > neither of them are legal entities nor in the US. Legally, they are > > probably more akin to informal associations. > > > > > > The suggestions for falsifying the dates of transactions for > > convenience in accounting strike me as very bad advice. Is it even legal > > for an organization that has to abide by US tax laws. > > > > > > Similarly, I don't understand the advice to just treat Paypal > > transactions as if they were directly on checking. This would make > > accounting for Paypal fees strange. For organizations outside the US, > > Paypal no longer holds funds; they transfer them immediately, so the Paypal > > balance is always zero except for immediately after a deposit to Paypal. > > Even so, it is much easier to track activity treating Paypal as a bank > > account. > > > > > > Finally, I don't understand the suggestions about not having a cash > > account and immediately depositing all cash to checking. Perhaps it is > > partly because I live in a country where many transactions are still done > > with cash, where no one uses checks, just bank transfers. But I often > > accept donations in cash, and often pay bills in cash. Not accounting for > > those transactions directly would be neither accurate nor convenient. > > > > > > Will > > > > > > On 2020 Jul 24, at 07-24 22:13:26, doncram <donc...@gmail.com> > > wrote: > > > > > > Here is an example set of accounts set up as best possible for a real > > > nonprofit, "Botany Bay Gardens". This might be enough guidance for > > a few > > > nonprofits. But I explain why/how GnuCash usually fails for > > nonprofits, > > > how it usually cannot serve them well enough, so a Treasurer coming > > here > > > should probably decide to use Quickbooks (in its Pro version, or in a > > > version packaged for Nonprofits) instead. Unfortunately the visiting > > > Treasurer's time is usually wasted, even more so if they proceed with > > > trying to implement GnuCash, because they can't tell in advance how > > it will > > > not work. I wish GnuCash would make a few changes, so nonprofits > > could be > > > served. > > > > > > Recently Fiona and Joshua (and last year BigAl) asked questions about > > > how/whether GnuCash accounts could be set up to handle a nonprofit. > > Here's > > > how: see the attached Chart of Accounts, Balance Sheet, and Income > > > Statement, for a real nonprofit, "Botany Bay Gardens" (not its real > > name), > > > and the following notes: > > > > > > 1. Setting this up in GnuCash just now did not take me terribly > > long, but I > > > already knew well what are the accounts that are needed and how I > > want them > > > organized. This is in the United States. I previously reviewed some > > > similar but bigger nonprofits reporting in their publicly available > > U.S. > > > Internal Revenue Service Form 990 financial statements filings. And > > I > > > worked with the board and determined how their previous reporting > > system > > > did not work for them, as well as how it would not work well for > > their IRS > > > 990 reporting which they are soon required to start, because the > > nonprofit > > > is growing over the reporting requirement threshold. Take some time > > and > > > design out your own chart of accounts in a spreadsheet, and revise as > > > necessary with others' input. > > > > > > 2. You have to use account numbers (which are optional in GnuCash > > and in > > > Quickbooks, but if you use them, they set the order) to make your > > reports > > > presentable, with ordering that makes sense for your organization. > > > Otherwise the default alphabetical order is maddening. > > > > > > 3. I prefer to set up one "Placeholder"-type account titled "Cash", > > which > > > in this case contains two items: the organization's checking > > account and > > > its investment account with a local foundation (which charges fees > > but > > > handles investment of spare funds and assists in fundraising in > > various > > > ways). These are both convertible easily to real cash. I don't use > > a > > > "Petty Cash" account, because any cash collected in this nonprofit, > > say at > > > a fundraising event, should be promptly deposited into the checking > > > account. You don't want to record each tiny separate addition to > > the petty > > > cash you have in hand (and indicating each as Fundraiser ticket sales > > > revenue or whatever); you just want to record one big deposit of > > all of it > > > into the checking account (with just one entry recording the ticket > > sales > > > in total). > > > > > > 4. Note the way "Cash" is defined is consistent with U.S. and all > > other > > > countries' accounting standards: it is what is really liquid. It > > would be > > > nice if GnuCash provided a Statement of Cash Flows, one of the 3 > > basic > > > accounting reports, but it does not. The SCF would provide a > > > reconciliation of income (from the bottom line of Income Statement) > > to the > > > actual change of cash from beginning to end of period. Showing how > > changes > > > in Accounts Receivable and Accounts Payable and Inventory and other > > current > > > assets and liabilities have used up or generated cash, and so on. > > SCF > > > reporting is maybe not crucial for a nonprofit, but GnuCash's lack > > is a > > > factor in why Quickbooks is used instead for this nonprofit. > > > > > > (Long, side comment or rant, please feel free to skip: GnuCash does > > have a > > > feature labelled that way, but it is a report invented by computer > > > programmers with no concept of what cash flow reporting actually > > is. It > > > has no resemblance to the very well-defined SCF as taught in > > accounting > > > classes for all business students and as used in real life for > > businesses > > > and nonprofits. No offense at all is intended; I have the greatest > > respect > > > for the GnuCash programmers, current and past, who have achieved so > > much. > > > And I even admire how GnuCash's alternative is kind of clever, > > although in > > > an odd way not actually useful to anyone. Note the omission renders > > > GnuCash less feasible for using in an intro accounting course, for > > > example. (You can, with unnecessary work in a spreadsheet, compose > > a SCF > > > for your organization though. There is a structured exercise often > > > provided in intro accounting textbooks, where students do that, > > working > > > from the Income Statement for the period plus beginning and end > > Balance > > > Sheets, plus additional information. It is just a mathematical, > > easily > > > programmable thing, but it is very hard to get right when doing on > > your > > > own. Accounting rules in all countries, at least for publicly traded > > > companies, have required their financial statements to include the > > SCF, > > > during at least the last several decades. In the U.S. since 1989 or > > so. > > > End rant.) > > > > > > 5. The nonprofit actually does accounting mostly on a cash basis: > > pledges > > > of future donations are not recognized and recorded as Accounts > > Receivable, > > > bills due but not yet paid are not recorded as Accounts Payable. It > > is > > > simpler just to recognize those when you receive or send out > > payment. And, > > > at the end of the year, some expenses actually paid on January 2nd, > > say, > > > but relating to a December 28th event, are recorded as having been > > paid on > > > December 31. This is simpler than recognizing the expense on > > December 28 > > > and setting up an Accounts Payable, and has the same effect in > > achieving > > > matching of revenues and expenses in the past year period. (So the > > Chart > > > of Accounts should probably not have AR and AP, but I left them in, > > in this > > > example.) > > > > > > 5. There is no Credit Card account as I don't see why a nonprofit > > would > > > have a credit card. It should have a debit card or two usable by the > > > Treasurer and the President, say. For a purchase, say, you just > > make one > > > entry, of the reduction of checking account balance by the debit, > > and which > > > expense category applies. > > > > > > 6. There is no Paypal account in this nonprofit's reporting, > > although this > > > nonprofit does sell tickets and receive dues there, so in fact > > sometimes > > > there are significant balances there. But before closing any > > period, the > > > accountant can just transfer the balance at Paypal to the checking > > > account. Perhaps dating the transfer on December 31, say, even > > though it > > > actually is implemented on January 15. Each Paypal transaction can > > be > > > recorded just once, on date Paypal received the funds, as an > > increase in > > > checking balance and recognition of ticket sales revenue. Or maybe > > it > > > would be better to show a Paypal account, as part of Cash. > > > > > > 7. This nonprofit is simple in having no direct employees, so no > > payroll > > > expenses and no accounts to handle Social Security contributions or > > to > > > handle required Workmen's Compensation expense, etc. Instead the one > > > hourly paid gardener person (say they get $15 per hour) is actually > > set up > > > by a local temp agency as an employee of theirs. The temp agency > > issues > > > paychecks and pays the necessary taxes, etc., for charge of > > something like > > > $18 per hour. The gardener's expense, for the nonprofit, is in > > "Operations > > > Contract Services". The nonprofit also has website and social media > > work > > > done by an independent contractor. At the end of the year, the > > nonprofit > > > does issue 1099 statements for this contractor and for any companies > > whose > > > payments during the year were > > > > > > 8. Where GnuCash really fails for this nonprofit, though, is that it > > does > > > not support Job Costing. Job Costing is not apparent in an > > organization's > > > overall, total reporting. It provides for internally useful > > reporting. > > > This nonprofit has multiple separate gardens which constitute > > different > > > programs, some of them individually funded by a separate grant, for > > which > > > tracking of expenses is required. It has several fundraiser events > > each > > > year, and the organization needs reporting that shows how it does in > > each > > > one. Job Costing, as can be done in Quickbooks, provides that. For > > a > > > construction firm, say, it would allow tracking of each separate job > > (e.g. > > > each renovation or new house construction) so the revenues and the > > expenses > > > for each one is reported. An Income Statement by Job is a standard > > report, > > > providing a column for each separately defined job and in total for > > the > > > organization. And management can try to figure out which types of > > jobs are > > > more profitable, and why. For a nonprofit, the Job Costing feature > > allows > > > you to show a restricted grant that is received as revenue in a > > given job, > > > and for you to document the usage of those monies by expenses > > charged to > > > that job. This is essential. By the way, you can also budget by > > job, and > > > have reports on Budget vs. Actuals by Job. > > > > > > (Another rant, sorry: When new users come to GnuCash and ask about > > job > > > costing, unfortunately they get a lot of misdirection, or at least > > that is > > > what I have seen a few times a few years ago. They may be directed > > to > > > expand their Chart of Accounts to add a new separate revenue line > > for each > > > job, and a new line for each type of expense incurred in each job. > > > Consider a catering firm with 100 or 200 similar jobs each year. > > The Chart > > > of Accounts would rapidly become unworkable, and even though the > > > information is separately recorded, standard reports don't work, > > either. > > > If Job Costing is supported, the Income Statement by Job report, run > > for a > > > specified period, would nicely show columns for just the jobs that > > were > > > active in that period, lined up nicely side-by-side. Some advice I > > have > > > seen given out seems crazy. And I think it would be fairly easy, > > > programming-wise, for GnuCash to allow definition of job codes. In > > each > > > entry in a register or journal entry, the user would be allowed to > > select > > > which job is relevant, if any, in an available job code field. End > > this > > > rant.) > > > > > > I'll stop here. The last numbered note above is why GnuCash can't > > be used > > > for the Botany Bay Gardens nonprofit, while an oldish copy of > > Quickbooks, > > > the Quickbooks Pro 2017 version, does suffice. Like many, I > > personally > > > dislike most commercial accounting software (for how they drop > > features I > > > need, how they add junk i do not want, and how they try to charge > > more and > > > more, among other reasons) and I do like freeware in general and > > GnuCash in > > > particular, as far as it goes. But I cannot be at all professional > > and > > > impose usage of software that does not provide the internal > > reporting that > > > this nonprofit organization needs, when Quickbooks can do it (at > > least in > > > the Pro version, at one-time expense of $300 or so, although the > > software > > > tries to make you upgrade after 3 years by cutting off some > > functionality). > > > > > > I hope this helps someone. Please do comment! > > > --Don > > > > > > P.S. While writing this, I realize the Chart of Accounts that I > > share omits > > > a few things that the real nonprofit has, and that I discuss above: > > for > > > example it does actually need and use a grant revenue account line to > > > record the grants received into its various jobs. Feedback about > > these > > > PDFs as teaching examples would also be appreciated. > > > > > <BBG_ChartOfAccounts.pdf><BBG_BalanceSheet><BBG_IncomeStatement>_______________________________________________ > > > gnucash-user mailing list > > > gnucash-user@gnucash.org > > > To update your subscription preferences or to unsubscribe: > > > https://lists.gnucash.org/mailman/listinfo/gnucash-user > > > If you are using Nabble or Gmane, please see > > https://wiki.gnucash.org/wiki/Mailing_Lists for more information. > > > ----- > > > Please remember to CC this list on all your replies. > > > You can do this by using Reply-To-List or Reply-All. > > > > > > _______________________________________________ > > > gnucash-user mailing list > > > gnucash-user@gnucash.org > > > To update your subscription preferences or to unsubscribe: > > > https://lists.gnucash.org/mailman/listinfo/gnucash-user > > > If you are using Nabble or Gmane, please see > > https://wiki.gnucash.org/wiki/Mailing_Lists for more information. > > > ----- > > > Please remember to CC this list on all your replies. > > > You can do this by using Reply-To-List or Reply-All. > > > > _______________________________________________ > > gnucash-user mailing list > > gnucash-user@gnucash.org > > To update your subscription preferences or to unsubscribe: > > https://lists.gnucash.org/mailman/listinfo/gnucash-user > > If you are using Nabble or Gmane, please see > > https://wiki.gnucash.org/wiki/Mailing_Lists for more information. > > ----- > > Please remember to CC this list on all your replies. > > You can do this by using Reply-To-List or Reply-All. > > > > > > _______________________________________________ > > gnucash-user mailing list > > gnucash-user@gnucash.org > > To update your subscription preferences or to unsubscribe: > > https://lists.gnucash.org/mailman/listinfo/gnucash-user > > If you are using Nabble or Gmane, please see > > https://wiki.gnucash.org/wiki/Mailing_Lists for more information. > > ----- > > Please remember to CC this list on all your replies. > > You can do this by using Reply-To-List or Reply-All. > > > _______________________________________________ > gnucash-user mailing list > gnucash-user@gnucash.org > To update your subscription preferences or to unsubscribe: > https://lists.gnucash.org/mailman/listinfo/gnucash-user > If you are using Nabble or Gmane, please see > https://wiki.gnucash.org/wiki/Mailing_Lists for more information. > ----- > Please remember to CC this list on all your replies. > You can do this by using Reply-To-List or Reply-All. -- Dr David R Cousens B.Sc, M.Prof. Acc., Ph.D., G.C.Ed _______________________________________________ gnucash-user mailing list gnucash-user@gnucash.org To update your subscription preferences or to unsubscribe: https://lists.gnucash.org/mailman/listinfo/gnucash-user If you are using Nabble or Gmane, please see https://wiki.gnucash.org/wiki/Mailing_Lists for more information. ----- Please remember to CC this list on all your replies. 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