Hello, Anselm:
Welcome to GnuCash!
On 2025-08-14 07:24, Anselm Schüler wrote:
Hi,
I’m reading the GnuCash guide that’s offered on initial launch of
GnuCash.
The chapter The Basics introduces the accounting equation:
/Assets - Liabilities = Equity + (Income - Expenses)/
And I do not understand how it is intended to be understood.
It sounds like this question is about basic double-entry accounting
concepts. The GnuCash Guide provides a tiny introduction to this. But if
the Guide leaves you with questions, you are better off trying to learn
from an accounting textbook. The Guide does not try to teach you accounting.
If we understand equity as representing the total net wealth,
aggregating the “settled” income in assets and the “in-flight” income
then we can see that a simple test scenario
/Assets = $0
Liabilities = $0
Income = $5
Expenses = $0/
This test scenario fails a basic requirement of double-entry
bookkeeping: the debits and the credits do not balance. There should be
a second entry in that scenario. When you received the income, where
did it go to? A bank account? That would be an asset. So the corrected
scenario is:
/Assets = $5 debit
Liabilities = $0
Income = $5 credit
Expenses = $0/
Continue reading to sections 2.1.3 and 2.1.4 of the Guide, which
scratches the surface of this. As it says there:
[Assets and Expenses account types] are known as *debit balance
accounts* in accounting practice, that is the normal positive balance
for these accounts is increased by *debit* entries…. Similarly,
[Liabilities, Equity, and Income account types] are known as *credit
balance accounts*, that is the normal positive balance for these
account types is increased by *credit* entries to the accounts of
these types.
Does this help? Best regards,
—Jim DeLaHunt
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