Hi folks,
Another beginning bookkeeper here. Derek's advice sounds like what I gathered
as I tried to learn how to account for a operating reserve.
But explaining this to our group of non-accountants, at every quarterly
meeting, over and over again for years on end, has convinced me that I now
prefer the cash accounting method because I just can not stomach another round
of repeatedly answering the same question, every quarter, for the rest of my
bookkeeping service.
Brian-
When rich pool their money via a corporation, rich-owned media say
'entrepreneurial' and 'fair'.When poor pool their labor via a union, rich-owned
media say 'restraint of trade' and 'unfair'.Who pays the piper, calls the
tune.Let's form a global, interfaith, multi-union, democratic, community media
powerhouse.
On Friday, January 17, 2025 at 04:58:44 PM EST, Derek Robinson via
gnucash-user <[email protected]> wrote:
This sounds like what an accountant would call an accrual and is in fact the
fundamental transaction in accrual accounting. If I understand correctly:
- You know you owe the money- You do not immediately have to pay the money
The accountant would debit an expense and credit a liability, so that the
expense is incurred now (in general expenses are recognized when you know you
owe, not when you actually pay them) and the liability appears on the balance
sheet, decreasing your net worth at the time you recognize the expense. When
you pay the money you would credit your bank account and debit the liability,
so that the liability is erased as you pay the money. Net worth does not change
- both assets and liabilities are decreased by the same amount in this second
transaction.
Contrast this with cash accounting, where you just know in your head that you
owe the money, but you only record the transaction when you pay it. This is bad!
In practical terms consider a separate bank account for situations like this,
so you don't accidentally spend money you in fact owe.
This is more accounting/procedural than about Gnucash=2E
Suppose I had an amount of money that I needed to protect so that it was a=
vailable for a future occasion=2E What would be the "preferred" way to do t=
his=2E
I could create the transaction in the account ledger and future date it=2E
I could create an expense transaction, but not future date it, and then wh=
en the time comes, repay it=2E
I could transfer it to either an asset or liability account, and when the =
time comes, repay it=2E
I'd be interested in your thoughts=2E
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