Understood that those without an accounting background often misunderstand what debits and credits actually mean.
I don't know whether the thread you referenced reached a conclusion but the accounting definitions of debit and credit and how they are used in accounting is however formally logically self consistent. The same definitions are used world wide in accounting and GnuCash is an accounting program and it fully implements the rules of accounting. The developers have provided the facility to use the non formal termsthat is consistent with the formal label but when it gets down to how the program works and sorting out whether a user is using the program correctly it strictly obeys the formal definitions and rules of accounting and has to. There is no confusion if you know and apply the formal definitions. On the contrary the informal labels are more open to misinterpretation unless you apply a similar set of definitions and rules to them and those rules tend to be far more complex and appear to be far more arbitrary. The effort involved in becoming failiiar and applying the formal definitions is far less than for the informal ones and it is the core of how double entry accounting works to identify and minimise entry errors. The accounting definition relies on the concept of an entity whose transactions are being accounted for and in the accounts of that entity, the concept of an accounting period and the accounting equation then expresses the realtionship between the various types of accounts in the form: Assets = Liabilities + Equity + (Income - Expenses) The reason that Income and Expenses are grouped with Equity is that they are actually equity accounts recording the increases and decreases in Equity during the current accounting period and the minus sign befor e Expenses indicates that expenses decrease equity. A debit increases the balance of an account of the types on the LHS of the equal sign and a credit decreases the balance of an account of that type on the LHS. For accounts of a type on the RHS, a credit increases the balance of an account and a on the RHS (unless the account type is preceded by a minus sign in which case it is a decrease) and conversely a debit decreases the balance of accounts of that type again with reversal where the type is preceded by a minus sign. The steps in interpreting a statement are: 1 Determine the entity for which the statement has been prepared and applies to; 2 Apply the definitions/rules above to determine whether a particular entry is a debit or a credit for the type of the account in the hands of that entity. A statement prepared by a bank is generally prepared from the perspective of the bank. Similarly another business providing a statement of your transactions with it will be prepared as those transactions apply to the entity which is that other business. For a bank your savings/cheque account is a Liability whereas for them a loan or overdraft to you is an Asset whereas in your hands a savings or cheque account is an Asset and a loan or overdarft will be a Liability. Generally then the sense of debits and credits in a bank statement is the reverse of what they mean in your personal accounts. (That is of course unless the bank tries to be helpful and supplies the statement as if you are the entity the statement applies to without explicitly stating that). David Cousens On Sun, 2024-05-05 at 09:40 +1000, flywire wrote: > > > > You need to get a grasp of double entry bookkeeping concepts... > > I agree but I wouldn't focus on the formal meaning of Credit/Debit, > even if > you understand it most people have the wrong understanding - > https://lists.gnucash.org/pipermail/gnucash-user/2023-May/106929.html > - and > following the thread into July it gets screwy and unresolved. > > The Guide has a dozen transactions, and actually entering them into > GnuCash > while you work through the documentation should give you enough > experience, > confidence, and understanding to use the Common features of GnuCash. > Sometimes a tutorial concept is not immediately clear but becomes > clearer a > little later on. Unfortunately, the tutorial does not continue > through to > the Advanced (mainly business) features. > > Regards > _______________________________________________ > gnucash-user mailing list > gnucash-user@gnucash.org > To update your subscription preferences or to unsubscribe: > 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. _______________________________________________ gnucash-user mailing list gnucash-user@gnucash.org To update your subscription preferences or to unsubscribe: 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.
