On 1/16/2023 7:29 AM, Dr. David Kirkby wrote:
Apologies if this is too much an accounting question, but I'm stuck, and am
trying to work out how GnuCash will handle this.
It is accounting, as opposed to gnucash, but I will help. But please do
note that perhaps more basis in double entry accounting needed than
just the tutorial if doing for a business.
I'm trying to enter into GnuCash my company accounts for this financial
year only - I'm not going to bother trying to enter every transaction since
the company started. So the opening balances should reflect the company's
financial position on 28/2/2022, and transactions from 1/3/22 being
recorded.
I have the account
Assets:Fixed Assets
All that contains is test equipment and computer equipment, all of which
will be depreciated - there's no land, or other things that don't
depreciate.
I initially set Assets:Fixed Assets to have an opening balance of £x, as
that's what my accountant told me the total of all thef fixed assets was
worth. I see that is reflected in the account
Equity:Opening Balances
However, after I asked him, my accountant gave me a breakdown of the net
value of the individual fixed assets, which have obviously depreciated over
time. I thought it would be useful to have their individual net values on
28/2/2022 recorded in GnuCash
OK, I will describe what you SHOULD have done and how to get from where
you are to there.
Ideally under fixed assets you have sub accounts, perhaps first by
acquisition year and under that for the individual things (or group of
same type). All of these accounts should have two sub accounts, one for
basis (cost of acquisition) and one for depreciation taken, the
difference being the current net book value. Note that USUALLY
depreciation is adjusted annually, as you are not required to do
monthly, AND this is to your advantage if/when any are disposed of (will
decrease any gain and increase any loss if you are allowed to use as net
value remaining that of the previous year end)
Getting there from where you are should not require you changing
anything in equity. You would just be "transferring" from your initial
structure of fixed assets to this new one. The "credit side" is account
in the old structure as you debit into the new structure. Thus, you can
rename (for now) you existing account "fixed assets" (in which nothing
broken down to something like "xfixed assets" and create your new fixed
assets tree with all the accounts in it zero. You then populate the new
tree using transactions that put in the values using the old structure
(single account) as the other side of these transactions. When you are
all done, the remaining balance in xfixed assets should be zero and you
can HIDE it.
Each year as you depreciate (part of end of fiscal year processing) the
other side of the transaction will be an account under expenses named
"depreciation of fixed assets. You could set up to do monthly but WHY?
(what benefit do you gain vs what does this cost you). Remember,
depreciation is an expense but does not represent any money flowing in
or out. The money went out when you acquired the fixed asset (but you
weren't allowed to treat that as an expense at the time).
Michael D Novack
PS: Whether you break down (within year) to particular fixed assets
depends mainly on the likelihood of individual items being disposed of
for gain or loss. If this is unlikely (far more likely to be all of
none) then no need to bother.
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