Re: [GNC] corporate profit tax ........... where to put
On 5/8/2023 7:17 PM, Karl May wrote: Hi. Thanks a lot for the response. My misconception comes probably from looking at book keeping and GnuCash through continental European eyes. There may, of course be differences, how I keep books and what I need to report vs somebody in continental Europe. But I look at bookkeeping from the point of view of how it was done pen and ink on paper not all that long ago (within my lifetime; how I learned to do it). I am positive that continental European bookkeepers were also able to do it pen and ink on paper. If can be done pen and ink on paper, can be done using gnucash. If you choose "journal view" then you enter transactions just like you did in the good old days (not! because of the many transcription errors doing manual posting from journal to ledger --- the computer automates posting, no errors). Show me the subsection of books, the transactions, etc. as they would be pen and ink on paper ans then make your claim "can't do that using gnucash" But please note that does NOT mean using one of the skeleton example CoAs that come with gnucash. It means you may have to "roll your own" CoA in gnucash to match your paper one. Nor am I talking about terminology differences. Michael D Novack ___ 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.
Re: [GNC] corporate profit tax ........... where to put
Hi. Thanks a lot for the response. My misconception comes probably from looking at book keeping and GnuCash through continental European eyes. That is, putting corporate profit tax through an expense account, as suggested by John and Jim, while working out in terms transactions if the expense account is omitted from profit and loss, is an absolute no-no. Further, since the company has an initial equity of $1, and equity is reported only by closing the books or running a report, having a total negative number in equity (in the account frame, not the report) due to a liability:equity swap just "hurts the eye". Cheers On Tuesday, 9 May 2023 06:20:33 AEST Michael or Penny Novack wrote: > > Now . I understand that gnucash has no separate Equity account, at > > least as long as the books are not closed. So how to book step 1)? > > Before dealing with the question itself. let's get THIS misconception > out of the way. I believe the source of the misconception is that > gnucash provides example "skeleton" books with typical accounts in the > CoA under asset. liability, equity, income, expense, etc. Except these > examples don't happen to have sub accounts under equity and that might > be the source of the misconception that you couldn't have such accounts > > For example, suppose the entity is a partnership with three partners, A, > B, and C. A contributed $10,000 of the capital, B $5000, and C $5000 of > "goodwill". > > Then under equity you would have accounts for partner A, Partner B, and > partner C. Best done not using the initial value wizard but an explicit > transaction debiting bank $15,000 and goodwill %5000 (goodwill is > considered an asset of the intangible sort) and crediting partnerA > $10,000 partnerB $5000 and partnerC %$5000. After this transaction, > total assets would be $20,000, total liabilities 0, and total equity $20,000 > > > In other words, gnucash has in your CoA the accounts that YOU choose to > put there according to your needs. Gnucash doesn't have or not have > particular accounts except in the sense that example skeletons are > provided for the use of beginners. > > Michael D Novack > > ___ > 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.
Re: [GNC] corporate profit tax ........... where to put
Now . I understand that gnucash has no separate Equity account, at least as long as the books are not closed. So how to book step 1)? Before dealing with the question itself. let's get THIS misconception out of the way. I believe the source of the misconception is that gnucash provides example "skeleton" books with typical accounts in the CoA under asset. liability, equity, income, expense, etc. Except these examples don't happen to have sub accounts under equity and that might be the source of the misconception that you couldn't have such accounts For example, suppose the entity is a partnership with three partners, A, B, and C. A contributed $10,000 of the capital, B $5000, and C $5000 of "goodwill". Then under equity you would have accounts for partner A, Partner B, and partner C. Best done not using the initial value wizard but an explicit transaction debiting bank $15,000 and goodwill %5000 (goodwill is considered an asset of the intangible sort) and crediting partnerA $10,000 partnerB $5000 and partnerC %$5000. After this transaction, total assets would be $20,000, total liabilities 0, and total equity $20,000 In other words, gnucash has in your CoA the accounts that YOU choose to put there according to your needs. Gnucash doesn't have or not have particular accounts except in the sense that example skeletons are provided for the use of beginners. Michael D Novack ___ 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.
Re: [GNC] corporate profit tax ........... where to put
Karl, Jim is right, you're mistaken or confused. You can create and edit Equity accounts just like Asset and Liability ones. Closing the books simply transfers the balances of all Income and Expense accounts to some other Equity account that you designate when you run it. For most for-profit corporation books that would be called Equity:Retained Earnings. As Jim said, Expense is a special type of Equity, and the usual way to book a tax liability would be Dr Expense:Tax:Whatever and Cr Liabilities:Tax:Whatever. That's just the usual way: If you want to skip the Expense account step for some reason then you can certainly create an Equity:Tax:Whatever account and Dr that instead. Regards, John Ralls > On May 8, 2023, at 12:28 AM, Karl May wrote: > > Hello Jim, > > Thank you for your response. > > What I would do on paper I already lined out in my first email: equity- > liability swap. For this to happen there must be a an "approachable" equity > account in gnucash, which from my understanding will only show a value if the > "books are closed". > > I.E. closing Income & Expense for the financial year, calculate profit and > tax, > book profit after tax into Equity, book tax on profit into liabilities, pay > tax > by reducing financial assets and liabilities. > > However, "closing books" is discouraged as it interferes with the reporting > features. > > Further, IMHO one cannot put the profit tax under "Expenses" as they would > turn > up as cost in the P & L . catch 22 (except I deliberately de-select > that account, which appears to be a crutch) > > Due the gnucash discouraging "closing books" the accounting questions is a > GnuCash questions. > > Best > > On Monday, 8 May 2023 17:06:47 AEST Jim DeLaHunt wrote: >> Hello, Karl: >> >> This sounds like an accounting question to me, not a GnuCash question? >> How would your account advise you to track these transactions if you >> were using a pen and paper accounting book? You can do it the same way >> in GnuCash. >> >> I am a bit surprised by your statement, "that gnucash has no separate >> Equity account". I see a top-level account "Equity" in my Chart of >> Accounts, and a whole tree of other accounts below it. Also, when I pay >> tax, I involve an account of type Expense for the transaction, e.g. an >> account like >> Expense:My Business:Tax:Income Tax >> >> I understand that accounts of Expense and Income are special cases of >> Equity accounts. But that too is an accounting question, not a GnuCash >> question. >> >> I hope this helps, >> —Jim DeLaHunt >> >> On 2023-05-07 23:37, Karl May wrote: >>> Hi, >>> >>> I am wondering where to put the tax on corporate profit. >>> >>> My understanding from accounting training is: >>> >>> 1) As long as not paid it would swap between Equity and Liability, i.e. > the >>> equity shrinks by the tax amount and the liabilities increase by the tax >>> amount. >>> >>> 2) At pay date it would be an asset-liability decrease, i.e. financial > assets >>> and liabilities shrink by the tax amount. >>> >>> Now . I understand that gnucash has no separate Equity account, at >>> least as long as the books are not closed. So how to book step 1)? >>> >>> Thanks and best regards >>> >>> Karl >>> >>> >>> ___ >>> 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. > > > > > ___ > 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.
Re: [GNC] corporate profit tax ........... where to put
Hello Jim, Thank you for your response. What I would do on paper I already lined out in my first email: equity- liability swap. For this to happen there must be a an "approachable" equity account in gnucash, which from my understanding will only show a value if the "books are closed". I.E. closing Income & Expense for the financial year, calculate profit and tax, book profit after tax into Equity, book tax on profit into liabilities, pay tax by reducing financial assets and liabilities. However, "closing books" is discouraged as it interferes with the reporting features. Further, IMHO one cannot put the profit tax under "Expenses" as they would turn up as cost in the P & L . catch 22 (except I deliberately de-select that account, which appears to be a crutch) Due the gnucash discouraging "closing books" the accounting questions is a GnuCash questions. Best On Monday, 8 May 2023 17:06:47 AEST Jim DeLaHunt wrote: > Hello, Karl: > > This sounds like an accounting question to me, not a GnuCash question? > How would your account advise you to track these transactions if you > were using a pen and paper accounting book? You can do it the same way > in GnuCash. > > I am a bit surprised by your statement, "that gnucash has no separate > Equity account". I see a top-level account "Equity" in my Chart of > Accounts, and a whole tree of other accounts below it. Also, when I pay > tax, I involve an account of type Expense for the transaction, e.g. an > account like > Expense:My Business:Tax:Income Tax > > I understand that accounts of Expense and Income are special cases of > Equity accounts. But that too is an accounting question, not a GnuCash > question. > > I hope this helps, > —Jim DeLaHunt > > On 2023-05-07 23:37, Karl May wrote: > > Hi, > > > > I am wondering where to put the tax on corporate profit. > > > > My understanding from accounting training is: > > > > 1) As long as not paid it would swap between Equity and Liability, i.e. the > > equity shrinks by the tax amount and the liabilities increase by the tax > > amount. > > > > 2) At pay date it would be an asset-liability decrease, i.e. financial assets > > and liabilities shrink by the tax amount. > > > > Now . I understand that gnucash has no separate Equity account, at > > least as long as the books are not closed. So how to book step 1)? > > > > Thanks and best regards > > > > Karl > > > > > > ___ > > 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. ___ 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.
Re: [GNC] corporate profit tax ........... where to put
Hello, Karl: This sounds like an accounting question to me, not a GnuCash question? How would your account advise you to track these transactions if you were using a pen and paper accounting book? You can do it the same way in GnuCash. I am a bit surprised by your statement, "that gnucash has no separate Equity account". I see a top-level account "Equity" in my Chart of Accounts, and a whole tree of other accounts below it. Also, when I pay tax, I involve an account of type Expense for the transaction, e.g. an account like Expense:My Business:Tax:Income Tax I understand that accounts of Expense and Income are special cases of Equity accounts. But that too is an accounting question, not a GnuCash question. I hope this helps, —Jim DeLaHunt On 2023-05-07 23:37, Karl May wrote: Hi, I am wondering where to put the tax on corporate profit. My understanding from accounting training is: 1) As long as not paid it would swap between Equity and Liability, i.e. the equity shrinks by the tax amount and the liabilities increase by the tax amount. 2) At pay date it would be an asset-liability decrease, i.e. financial assets and liabilities shrink by the tax amount. Now . I understand that gnucash has no separate Equity account, at least as long as the books are not closed. So how to book step 1)? Thanks and best regards Karl ___ 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.
