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I am getting up & running in GNUcash. I however am puzzled by the Loan and Equity:Opening balance results. I should note that this money for the student loan was spent years ago, so I entered my student Loan with the transfer coming from Equity:Opening balance.

This then shows in the Equity:Opening balance subaccount like this: screenshot of opening balances

However what perplexes me is, why does this loan increase the value of my Equity (Capital)?: screenshot of accounts view

I expect this figure to be my Assets - Liabilities, so a red, negative number.

Any guidance appreciated, T

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First,

  1. A credit account is increased by credit transactions and decreased by debits.

    Liabilities is a credit account and should be a positive number.

  2. A debit account is increased by debit transactions and decreased by credit.

    Assets is a debit account and should be a positive number.

Equity = Assets (debit) - Liabilities (credit) may be positive or negative.

You currently are subtracting a negative number for a net positive, since your Liabilities is set as a debit account.

How you currently are set -> Equity = Assets (debit) - Liabilities (debit)

It is easier to understand if you change the columns from Increase/Decrease to Credit/Debit. I believe this is changed through Edit > Preferences > Accounts > Labels > Use formal accounting labels.

To fix your situation, open up the Loan account and switch columns on the amounts. This will decrease Opening Balances and increase the loan, per your current column headings.

This is a snippet of Opening Balances. You see that Opening Balances is debited and the Loan/Liability account credited. I included Petty Cash to show the reverse. Petty Cash is an asset, so it credits Opening Balances and debits Petty cash.

This is a student loan Liability account. As you see, the Opening Balance is debited and decreased. The loan is credited and Liabilities increased. As payments are made, the reverse happens. The loan, being a credit account, is debited and the balance decreases. Opening Balances moves closer to 0 as well. The savings account, being a debit account, is credited and the balance decreases. There has been no change in Equity since Liabilities and Assets decresed by the same amount.

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