As described in Chapter 2, credits represent money transferred from an account. Tracking the liability balances lets you know how much debt you have at a given point in time.Ĭredits increase income account balances and debits decrease them. These represent the rights of your lenders to obtain repayment from you. Liabilities refer to what you owe, money you have borrowed and are obligated to pay back some day. Smaller, less consequential purchases are tracked as expenses, which we will cover shortly. Generally, you can think of these as things you insure, such as a house, vehicles, jewelry, and other expensive belongings. The register is similar to the stock register, except that you enter exchange rates instead of prices.Īsset For personal finances, use this type of account to track "big-ticket" item purchases that significantly impact your net worth. Funds represent ownership shares of a variety of investments, and like stocks they do not offer any guaranteed cash value.Ĭurrency If you trade other currencies as investments, you can use this type of account to keep track of them. Its account register provides the same extra columns for entering share and price information. Mutual Fund This is similar to the stock account, except that it is used to track funds. With these types of assets, you may not be able to easily convert them to cash unless you can find a buyer, and you are not guaranteed to get the same amount of cash you paid for them. The stock account's register provides extra columns for entering number of shares and price of your investment. Stock Track your individual stocks and bonds using this type of account. This is the second most liquid type of account, because you can easily convert it to cash on hand. This is the most liquid, or easily traded, type of asset.īank This account is used to track your cash balance that you keep in institutions such as banks, credit unions, savings and loan, or brokerage firms - wherever someone else safeguards your money. (Insert a graphic of a circle containing balance sheet accounts, with an incoming arrow for income accounts and an outgoing arrow for expense accounts.)Ĭash Use this account to track the money you have on hand, in your wallet, in your piggybank, under your mattress, or wherever you choose to keep it handy. The report that tracks this movement over a period of time is the Profit & Loss report, which we will discuss in section 10.2. Also on a regular basis, money moves out of your GnuCash environment through several expense accounts. On a regular basis, money moves into your GnuCash environment through one or more income accounts. On the other hand, income and expense accounts are much more dynamic, and you are generally more interested in the movement that takes place in these accounts. The purpose of a Balance Sheet report (covered in section 10.2) is to provide a snapshot of the balances in these accounts. You are generally more concerned with the balances of these accounts than you are in the activity going on in them, because the balances in these accounts determine your net worth at a specific point in time. As mentioned earlier, the first three types, assets, liabilities and equity, are balance-sheet accounts. In accounting, the five main types of accounts are Assets, Liabilities, Equity, Income and Expenses. Each account must have a unique name (that you assign) and one of the account types defined in GnuCash.
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