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I have recently (i.e. from the beginning of 2015) started tracking my personal finances with GNUCash, without any previous experience in accounting. While the interface is mostly intuitive (thanks to columns that are not labelled "credit" and "debit" but with more descriptive names) I have come up with a problem that I cannot seem to solve and a search of the GNUCash Handbook (which was sufficient for other questions) and online resources led to some confusion on my part. I have read these two questions on this site, but they do not seem to address my problem exactly.


I am currently organizing an event for an association and for expenses I have received an advance where I'll have to repay the difference after the event. I initially thought to record the advance as a liability, because it is money I now have but owe the association. So the money in my bank account comes from the liability account.

However, if I now buy something, the money will come from the bank account. How should I then proceed to indicate whether the money deducted from the account was paid for something for the association, or for something personal? I somehow have to decrease the balances in my asset and the liability accounts, while increasing only one expense account.

I still want to be able to reconcile the bank statement correctly, so creating a "virtual asset" is likely not the way to go. I could just cancel the expense since it was pre-paid but am not sure whether that is allowed.

Current setup:

Asset:Bank          1000
Liability:Advance         1000

When I pay for something:

Expense:Something     50
Asset:Bank                  50

This might work?

Liability:Advance     50
Expense:Something           50

Is this something that is allowed under normal accounting principles? I'm unsure because of the whole "no transaction without a receipt" thing. I'm also not sure whether my initial idea to classify the advance as a liability is correct, but it seemed so at the time.

I'd love to read your thoughts on this.

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When you pay expenses on behalf of someone, you do not Debit your expense accounts.

You credit your Bank and debit the Liability.

The method that you mentioned (debit expense then credit it back to liability) is an acceptable practice, but the method is only used when you accidentially debited your expense accounts without knowing that it is for someone else (or in the case of split transactions). You need to specify "being expense paid on behalf of someone" when you credit the expense account.

  • At first I thought this solution is impractical, as I will have to report every expense to the association cashier. However, I just noticed that I can easily generate a transaction report for the liability account. Thank you! – tschoppi Apr 9 '15 at 13:09

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