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.
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.