It's NOT just "freelancers". It's the more general problem of invoicing
only supported for when on accrual basis, not for when on cash basis. I
have been keeping books for non-profits and these are usually cash
basis. On the other hand, some individuals are required to use accrual
basis.
So the issue is (for you) how hard to make the annual or quarterly
adjustments (depends on how you file tax). I don't know what YOUR "line
items" might be, but if you are a freelancers providing a service, the
income side adjustments might not be hard at all. And you are in a
position not to have "pending" expenses at end of year/quarter.
Michael D Novack
ps -- producing the report with various accounts excluded not hard at
all. Your extra work is entering twice for each invoice when posted
received or paid (the second transaction moving from "pending" to
"paid"in income and expenses.
On 6/17/2021 7:07 PM, GrantSRobertson wrote:
When entering a customer invoice, it appears that the only balancing accounts
(the non-Accounts-Receivable accounts) GnuCash will allow one to choose from
are income accounts and certain, non-special, liability accounts. Normally,
this would be just fine for a business accounting system because businesses
accrue their income when it is earned. However, individuals (such as
freelancers) accrue their income only after it is paid. Therefore, if I am
not paid for months (it happens), then all my tax calculations will be off
because I will be paying taxes on income earned (the business way) instead
of only on income paid (the individual's way).
If I had complete control, I would assign an Equity:Pending_Income account
as the balancing account, to show that I had "equity" but not income, up
until the time I actually get paid. Then, after I get paid, I would manually
transfer that money from that special Equity:Pending_Income account to an
appropriate income account. I recognize that when applying a payment to a
customer invoice, the only ledger entries made are the transfer from the
Assets:Accounts-Receivable account to the Assets:Whatever_Banking_Account
account. So, any other transfers/ledger-entries would need to be made by
hand.
However, because the above is not possible, I am looking for other
alternatives.
My first thought is to simply introduce another level to the income accounts
hierarchy. Something like:
Income:Pending
Income:Paid (placeholder)
:<all the other accounts normally under income>
I would still have to manually create a separate ledger entry to transfer
money from the Income:Pending account to the actual income account it
belongs in.
And, I would then have to figure out how to generate reports that ONLY
reported income from under the Income:Paid placeholder parent account. Would
that be too very difficult? Or would I just be creating an ever-increasing
amount of compounding complexity to my accounting workflow?
In the end, it seems GnuCash is not really designed for freelancers yet. All
assumptions are that one is operating as a business with paid employees. It
seems to me, to achieve the most flexibility, GnuCash should allow users to
custom configure the behavior of the invoice and payment features, to allow
us to automatically do whatever transfers and ledger entries we see fit to
achieve the intended goal.
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