IEEE Region1 2012 Winter Workshop

Accounting 101
Double Entry Bookkeeping
&
GnuCash
Al Reinhart
Worcester County Section
( AlReinhart@ieee.org )
IEEE Region1 2012 Winter Workshop
Accounting 101 !nuCash
Account "ypes
#ou$le Entry %ookkeeping
"ransactions
!nuCash
IEEE Region1 2012 Winter Workshop
Accounting 101 !nuCash
The 5 Basic Accounts
%asic accounting rules group all &inance relate' things into
( &un'a)ental types o& *accounts+
E,erything that accounting 'eals -ith can $e place' into one o& these (
accounts.
/ Assets 0 things you o-n
/ Liabilities 0 things you o-e
/ Equity 0 o,erall net -orth
/ Income 0 increases the ,alue o& your accounts
/ Expenses 0 'ecreases the ,alue o& your accounts
It is possi$le to categori1e e,erything in your &inancial -orl' into these (
groups
IEEE Region1 2012 Winter Workshop
Accounting 101 !nuCash
Accounting E2uation
E2uity is 'e&ine' $y assets an' lia$ilities.
3et -orth (e2uity) is calculate' $y su$tracting your lia$ilities &ro) your assets.
E2uity 4 Assets 5 6ia$ilities
7ou increase e2uity through inco)e8 an' 'ecrease e2uity through e9penses
"he Accounting E2uation.
Assets 5 6ia$ilities 4 E2uity : (Inco)e ; E9penses)
"his e2uation )ust al-ays $e $alance'.
Can only $e satis&ie' i& you enter ,alues to )ultiple accounts
IEEE Region1 2012 Winter Workshop
Accounting 101 !nuCash
#ou$le Entry %ookkeeping
( Principle of Balance )
"he accounting e2uation is the ,ery heart o& a double entry accounting
system
Assets 5 6ia$ilities 4 E2uity : (Inco)e ; E9penses)
For every cange in value of one account in te Accounting Equation!
tere must be a balancing cange in anoter"
#is concept is $no%n as te Principle of Balance
&ou %ill al%ays be concerned %it at least ' accounts!
(ecessary to $eep te accounting equation balanced
IEEE Region1 2012 Winter Workshop
Accounting 101 !nuCash
#e$it < Cre'it
( 6e&t Si'e < Right Si'e )
%alancing changes (or trans&ers o& )oney) a)ong accounts is 'one $y
'e$iting one account an' si)ultaneously cre'iting another
Accounting debits an' credits 'o not )ean *'ecrease+ an' *increase+
#e$its an' Cre'its
each increase certain types o& accounts an' 'ecrease others
In asset an' e9pense accounts8
'e$its increase the $alance an' cre'its 'ecrease the $alance
In lia$ility8 e2uity an' inco)e accounts8
'e$its 'ecrease the $alance an' cre'its increase the $alance
#e$its are al-ays on the *le&t si'e+8 cre'its are al-ays on the *right+ si'e
IEEE Region1 2012 Winter Workshop
Accounting 101 !nuCash
Accounts
An account keeps track o& -hat you o-n8 o-e8 spen' or recei,e
Each account can contain )any su$5accounts
up to an ar$itrary nu)$er o& le,els
So)e accounts.
5 track the acti,ity &or that *real+ account
5 in&or) you o& its status.
i.e.. checking accounts8 sa,ings accounts8 cre'it car' accounts
=ther accounts
are use' to categori1e the )oney you recei,e or spen'.
5 these are not accounts that recei,e state)ents
5 they allo- you to 'eter)ine ho- )uch )oney is $eing spent
or recei,e' in each o& these areas
IEEE Region1 2012 Winter Workshop
Accounting 101 !nuCash
"ransactions
A transaction represents the )o,e)ent o& )oney a)ong accounts
Whene,er you spen' or recei,e )oney8 or trans&er )oney $et-een
accounts8 that is a transaction
In 'ou$le entry accounting8
transactions al-ays in,ol,e at least t-o accounts
5 a source account
5 a 'estination account
A transaction can $e a co)poun' transaction
A co)poun' transaction in,ol,es )ore than t-o accounts
IEEE Region1 2012 Winter Workshop
Accounting 101 !nuCash
Accounts
"here is no i)pose'8 speci&ic account tree layout (chart o& accounts)
7ou 'esign your account structure in any )anner you -ish
All accounting is $ase' on the ( $asic account types.
Assets8 6ia$ilities8 E2uity8 Inco)e8 an' E9penses
Accounts types are 'i,i'e into 2 groups.
5 %alance Sheet accounts (Assets8 6ia$ilities8 E2uity)
5 Inco)e an' E9pense State)ent accounts (Inco)e8 E9penses)
Accounting E2uation
Assets 5 6ia$ilities 4 E2uity : (Inco)e ; E9penses)
IEEE Region1 2012 Winter Workshop
Accounting 101 !nuCash
%alance Sheet Accounts
Balance )eet Accounts
* are Assets8 6ia$ilities8 an' E2uity
5 are use' to track the changes in ,alue o& things you o-n or o-e
Assets is the group o& things that you o-n8 that ha,e ,alue
5 Anything that has con,erti$le ,alue
5 What you theoretically coul' sell &or cash
6ia$ilities is the group o& things on -hich you o-e )oney
Anything -hich you )ust pay $ack at so)e ti)e
E2uity is the sa)e as >net -orth>
5 What is le&t o,er a&ter you su$tract your lia$ilities &ro) your assets
5 "he portion o& your assets that you o-n outright8 -ithout any 'e$t
IEEE Region1 2012 Winter Workshop
Accounting 101 !nuCash
%alance Sheet
Assets 6ia$ilities
( What has ,alue ) ( What you o-e )
E2uity
( What you o-n )
IEEE Region1 2012 Winter Workshop
Accounting 101 !nuCash
Inco)e an' E9pense Accounts
Inco)e an' E9pense Accounts
are use' to increase or 'ecrease the ,alue o& your accounts
%alance Sheet accounts
si)ply trac$ the ,alue o& the things you o-n or o-e
Inco)e an' E9pense accounts
allo- you to cange the ,alue o& these accounts
Inco)e is the pay)ent you recei,e
Will al-ays increase the ,alue o& your Assets an' thus your E2uity
E9pense is )oney you spen' to purchase goo's or ser,ices
E9penses -ill al-ays 'ecrease your E2uity
5 I& you pay &or the e9pense i))e'iately8
you -ill 'ecrease your Assets
5 I& you pay &or the e9pense on cre'it8
you -ill increase your 6ia$ilities
IEEE Region1 2012 Winter Workshop
Accounting 101 !nuCash
Inco)e < E9pense State)ent
( ?ro&it an' 6oss State)ent )
Inco)e.
@un's you recei,e
E9penses.
@un's you spen'
?ro&it < Surplus or 6oss (Inco)e )inus E9penses)
IEEE Region1 2012 Winter Workshop
Accounting 101 !nuCash
Account "ype ; #e$it < Cre'it
Asset accounts
debits increase account $alances
credits decrease account $alances
6ia$ility accounts.
debits decrease account balances
credits increase account $alances
E2uity accounts8
debits 'ecrease account $alances
credits increase account $alances
Inco)e accounts
debits 'ecrease account $alances
credits increase account $alances
E9pense accounts
debits increase account $alances
credits 'ecrease account $alances
IEEE Region1 2012 Winter Workshop
Accounting 101 !nuCash
"ransactions
Accounts are the &ra)e-ork an' structure o& a chart o& accounts
"ransactions are the 'ata -hich &ills each account
A transaction is an e9change $et-een at least 2 accounts.
A single transaction )ust al-ays consist o& at least t-o parts
5 a from account
5 a to account
"he from account is passing ,alue to the to account
IEEE Region1 2012 Winter Workshop
Accounting 101 !nuCash
Su))ary
@i,e account types.
Assets8 6ia$ilities8 E2uity8 Inco)e8 E9pense
All accounts ha,e a #e$it Si'e an' a Cre'it Si'e
#e$it Si'e is the 6e&t Si'e (6e&t Colu)n)
Cre'it Si'e is the Right Si'e (Right Colu)n)
Asset an' E9pense Accounts
#e$its increase8 Cre'its 'ecrease
6ia$ility8 E2uity8 an' Inco)e Accounts
#e$its 'ecrease8 Cre'its increase
"ransactions ('ou$le entry $ookkeeping)
Ro$ ?eter8 ?ay ?aul8 Austi&y it
IEEE Region1 2012 Winter Workshop
Accounting 101 !nuCash
!nuCash
A &ree8 -ell supporte' open source accounting so&t-are progra)
that i)ple)ents a 'ou$le5entry $ookkeeping syste)
!nuCash is.
5 a personal an' s)all5$usiness &inancial5accounting so&t-are
5 &reely license' un'er the !3B !?6
5 a,aila$le &or
!3B<6inu98 %S#8 Solaris8 Cac =S D an' Cicroso&t Win'o-s
!nuCash -e$site. !nuCash.org
5 #ocu)entation
5 Eelp Canual (1FG pages).
a 2uick re&erence on ho- to use !nuCash
5 "utorial an' Concepts !ui'e (21H pages).
5 an in 'epth gui'e to the concepts $ehin' using !nuCash
5 a tutorial to sho- ho- to put those concepts into practice
5 Support. Wikis8 )ailing lists8 IRC
!nuCash ten's to hi'e the 'ou$le in 'ou$le5entry $ookkeeping