Unearned revenue is definitely not a liability. If you're struggling with accounting, you shouldn't be messing with accrual based accounts like unearned income or accounts payable anyway. Just stick with cash based accounts, accounts that only change when cash actually changes hands.
Just keep it simple. Start with the big five and add sub-accounts only when you have to. 2015/1/1 Sale Assets $100.00 Income 2015/1/1 Account transfer Assets $10.00 Assets 2015/1/2 Bill Expenses $50.00 Assets So now you know when cash moved around, but it's not very useful. Take a look at that account transfer transaction. It doesn't tell you anything. You probably would like to know how much is in your checking account. This doesn't really tell you. So add a checking subaccount. 2015/1/1 Sale Assets:Checking $100.00 Income 2015/1/1 Account transfer Assets:Savings $10.00 Assets:Checking 2015/1/2 Bill Expenses $50.00 Assets:Checking What if you want to know how much you spent on your electric bill last year? Again, you can't find that out from this account structure so add a subaccount. 2015/1/2 Bill Expenses:Electricity $50.00 Assets:Checking What if you also want to know how much you spent on all utilities in addition to asking about electricity. That's right, just add another subaccount. Since Electricity is also a utility, put it into the Utilities account: 2015/1/2 Bill Expenses:Utilities:Electricity $50.00 Assets:Checking What if you want to know how much it cost you to maintain your office, not just your utilities. Add yet another subaccount. 2015/1/2 Bill Expenses:Office:Utilities:Electricity $50.00 Assets:Checking What if you don't want to know that? Then don't add the extra level. What if you want to know how much of your money is in which bank? Add a subaccount: 2015/1/1 Account transfer Assets:First National Credit Union:Savings $10.00 Assets:Citibank:Checking What if you want to know how much of your money is in credit unions vs. banks vs. brokerage accounts? That's right, add a subaccount. 2015/1/1 Account transfer Assets:Credit Unions:First National Credit Union:Savings $10.00 Assets:Banks:Citibank:Checking What if you never need to ask that question? Save yourself the trouble (and typing) and just don't add those subaccounts. There's a strong temptation when you're starting accounting to try and account for everything. What if you want to keep track of local vs. remote banks? Add a subaccount, otherwise don't. Save yourself from having to type something stupid like "Assets:Liquid:Banks:Multinational:Remote:USA:Northeast:New York:New York:Manhattan:Citibank:Checking" every time you write a check. What if you want to keep track of what income came from sales vs. from your salary? Add another subaccount! 2015/1/1 Sale Assets:Checking $100.00 Income:Sales Now let's talk about negative and positive. Note I cleverly wrote all those transactions without a single minus sign. All I had to do was record where the money ended up as the first thing and left the other amount to be implied. I could have written it in: 2015/1/1 Sale Assets:Checking $100.00 Income:Sales -$100.00 But Ledger doesn't make me do it, so I don't. Wait a minute. Why are sales negative? That's confusing, but so be it. That's not a bad reason to leave the negative side of your transactions to Ledger's inference. I started with where the money ended up, that's positive, so wherever it came from is negative. Does that mean expenses are positive? You betcha. That's where my money ended up. If that's where the money in the transaction ended up, that means its positive. I certainly have no trouble understanding the money LEFT my checking account, so it makes sense that side of the transaction is negative. I'm not saying don't use minus signs. Sometimes it would be more complex to try and split a transaction into enough pieces to get rid of all the minus signs. I only did it in this case to drive home the point: Wherever the cash ended up, that part of the transaction is positive. If the cash didn't end up there, it's negative. That's enough for now. Don't read past this point or you'll just get confused. It shouldn't be said, but if I don't say something it'll bug me the rest of the day. Technically, cost of goods sold is an income category, not an expense, because it goes into calculating your income, not your expenses. If you buy a widget for $3 and sell it for $5, that's $2 of income. Now just because it's a subaccount of income doesn't mean it's money coming in. Buying the widget for $3 is definitely money going out, but money doesn't normally go out when you're talking about income, so that means cost of goods sold is a negative income account and since income is already negative in ledger, that makes it a double negative account which is positive, which....uh...... You know what? Just forget I brought it up. If you record it as an expense your bottom line (profit) will still work out just fine. On Thursday, May 7, 2015 at 9:15:18 AM UTC-7, Kev Lau wrote: > > Hi Stefan, > Thanks for your input. > Yes I am trying to limit to 5 accounts. Expenses,Revenue,Assets,Liability > and Equity. > About positive and negative, I am still little confused so will go back to > reading more on Debit and Credit systems. i think I need help there. > Yes. I should have first a Liabilities:Unearned_Revenue: before going to > the Expenses:CostofGoodsSold. > > I think I will familiarize myself with positive and negative accounts. > > Thanks very much for the constructive feedback. It helped open my eyes. > > Will rectify the mistakes and re-post. Your feedback is very valuable to > me. > > > Regards > Kevin > > > On Thursday, May 7, 2015 at 4:52:16 PM UTC+7, Kev Lau wrote: >> >> Hi, >> I am still having difficulties with coming up with a proper mean of using >> a ledger for my business. I am hoping that someone here could see my Ledger >> and tell me if it looks sound. I don't want to make alot of entries and >> later realize I have been doing it wrong. I have read some material on >> accounting and feel that I understand how to make entries(but not sure how >> well I am organized and structured) >> >> Below is a sample of my hypothetical testing ledger. If you could have a >> look and give me some advise/tips I would deeply appreciate it. >> >> >> >> #GENERAL_ELECTRIC:ASSETS:CASH:CITIBANK US$-12,998.06 ;cash >> recd, debit to cash acct. >> #GENERAL_ELECTRIC:LIABILITIES:ACCOUNT_PAYABLE:VENTURE_ENTERPRISE US$ >> 12,998.06 >> >> #GENERAL_ELECTRIC:EXPENSES:BANK:CITBANK:FEES US$-19.35 ;cash paid >> out credit to cash acct. >> #GENERAL_ELECTRIC:EXPENSES:BANK:CITIBANK:FEES US$-77.41 ;cash paid >> out credit to cash acct. >> #GENERAL_ELECTRIC:ASSETS:BANK:CASH >> >> #GENERAL_ELECTRIC:ASSETS:CASH:CITIBANK US$-4,998.06 >> #GENERAL_ELECTRIC:LIABILITIES:ACCOUNT_PAYABLE:VENTURE-ENTERPRISE US$ >> 4,998.06 >> >> #GENERAL_ELECTRIC:EXPENSES:BANK:CITIBANK:FEES US$-34.19 >> #GENERAL_ELECTRIC:EXPENSES:COST_OF_GOODS_SOLD:TRIA_SOLAR:INV004 >> US$-12,000.00 >> #GENERAL_ELECTRIC:EXPENSES:BANK:CITIBANK:FEES US$-34.19 >> #GENERAL_ELECTRIC:EXPENSES:COST_OF_GOODS_SOLD:DYNO_WORKS:INV004 >> US$-3,808.00 >> #GENERAL_ELECTRIC:ASSETS:CASH:CITIBANK >> >> #GENERAL_ELECTRIC:REVENUE:SALES:MICROSOFT:INV004 >> >> US$6,000.00 >> #GENERAL_ELECTRIC:ASSETS:RECEIVABLES:INV004 >> US$-6,000.00 >> >> >> -- --- You received this message because you are subscribed to the Google Groups "Ledger" group. 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