On Tue, 23 Nov 1999 04:50:14 CST, the world broke into rejoicing as
"Rob Coker" <[EMAIL PROTECTED]> said:
> Actually, an accountant does not expect liabilities to appear negative, but
> positive. Accounting (at least in US) follows the principle:
>
> Assets = Liabilities + Capital(Equity)
That identity holds in financial statements, and particularly on one
section, namely the Balance Sheet.
What usually happens is that:
-- Assets wind up having "debit" balances, which "appears positive;"
-- Liabilities wind up having "credit" balances, which "appears negative;"
-- Profitable enterprises have equity accounts with net "credit" balances,
which "appears negative."
>From the Trial Balance Point Of View, that turns into a perspective
where everything adds to 0.
The Balance Sheet Point Of View puts the items expected to have debit
balances into the "Assets" section, and puts the items expected to have
credit balances into the "Liabilities and Shareholders' Equity" section,
effectively changing the sign of the latter section.
> The standard terms in accounting are debits and credits, but most (even
> educated people) who have not had an accounting class in a while won't get
> them straight. This is something Christopher B. noted in a separate post.
>
> So what do we do? I think it would be smart to have a home/business switch
> that would do the following:
>
> Home
> - has "real world" titles on debit/credit columns to avoid confusion
> - uses sum to zero logic rather than assets = liab + equity
> - has expense accounts be accrued accounts (really assets) that go down as
> you spend money
>
> Business
> - has debit/credit titles
> - uses assets = liab + equity and income = expenses + change in equity logic
> - has expense accounts as true expenses which go up as you spend money
>
> I've not even taken a cursory look at the code (yet), so I have no true idea
> how difficult this would be. But it seems like only a few titles and sign
> switches to me - not that hard.
The titles are *not* a big deal. They're controlled in a single place, and
I expect that my mission over Thanksgiving will be to turn them into Guile,
and put a parameter in to control this.
The sign switches probably need to be collected together under common
control.
On the "business" side:
> - uses assets = liab + equity and income = expenses + change in equity logic
I disagree. That view is a balance sheet view, which is relevant to one page
of a financial statement, and irrelevant to the rest.
What we should be presenting is the "trial balance" view, where balances
of accounts are laid out as (say) positive if they have net debit balances,
and negative if they have net credit balances. That will "balance to 0."
> - has expense accounts be accrued accounts (really assets) that go down as
> you spend money
I'm sorry; this one is confusing me. Are you indicating that:
a) There should be some budgeted amount in the account that falls to 0
as expenses get added in? or
b) Expenses should be treated as "looking negative"?
I'm afraid I'm not sure what confusion this will alleviate on the part
of naive users.
--
Rules of the Evil Overlord #64. "I will make the main entrance to my
fortress standard-sized. While elaborate 60-foot high double-doors
definitely impress the masses, they are hard to close quickly in an
emergency. "
<http://www.eviloverlord.com/lists/overlord.html>
[EMAIL PROTECTED] - <http://www.hex.net/~cbbrowne/lsf.html>
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