GnuCash Loan and Credit Card showing as debits

Question

Setup

• GnuCash 2.6.12
• Ubuntu 16
• $10,000 loan from external party (Brandon)

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In the official GnuCash documentation, it states that:

GnuCash treats account types Credit Card and Liability the same.

Which is exactly how it should be.

However, the issue I am running into is that my loan is not being treated as a credit, it is being treated as a debit even though I've checked it is a liability. This of course throws the balance sheet off by the $10,000.

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I am digging in the archives of my brain here back to high school accounting but I am fairly certain the loan charge of $10,000 offsets the $10,000 deposit into the checking account. No?

Here is a screenshot of the balance sheet:

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Here is the setup of the loan account.

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Wrap up

Please point me in the right direction, I am sure I am missing something minor or I just do not understand how loans (or liabilities in general) work in the balance sheet.

One final thing I should mention is that if I put the loan against the "Credit Card", it behaves as expected. I have compared the Credit Card and the Loan and cannot see a difference that would cause this.

Answer 1

A balance sheet is structured in a very specific way with Assets at the top and Liabilities + Equity at the bottom. In order for a Balance Sheet to balance, the two sections must be equal, and yours is indeed balanced.

You are probably thinking that a balance sheet should contain Equity (or Net Worth) on the bottom line, and that's a logical conclusion, but that's just not how a balance sheet works. Your Equity is correct - $0 - and your Net Worth is $0 as it should be.

Perhaps a more informative report would be the Net Worth report - this will show that your assets and liabilities are equal and cancel each other out for a net worth of $0.