Getting Started With Gnucash

Before you begin working on GnuCash, It is recommended you have a basic understanding of Accounting Concepts, and that you understand this section before proceeding.

GnuCash is easy enough to use that you do not need to have a complete understanding of accounting principles to find it useful. However, you will find that some basic accounting knowledge will prove to be invaluable as GnuCash was designed using these principles as a template.

The 5 Basic Accounts

Basic accounting rules group all finance related things into 5 fundamental types of “accounts”. That is, everything that accounting deals with can be placed into one of these 5 accounts:

Assets -Things you own

Liabilities -Things you owe

Equity- Overall net worth

Income – Increases the value of your accounts

Expenses – Decreases the value of your accounts

It is clear that it is possible to categorize your financial world into these 5 groups.

For example, the cash in your bank account is an asset, the business loan you owe the bank is a liability, money earned in the course of your business is income, and the cost of office supplies for your business is an expense.

The Accounting Equation

The relationship between 5 basic accounts and how one type of account affect the others:

Assets – Liabilities = Equity

You can increase your equity through income, and decrease equity through expenses. For Example: when you receive sales income you become “richer” and when you pay for office expenses you become “poorer”. This is expressed mathematically in what is known as the

Accounting Equation:

Assets – Liabilities = Equity + (Income – Expenses)

This equation must always be balanced, a condition that can only be satisfied if you enter values to multiple accounts.

For example: if you receive money in the form of income you must see an equal increase in your assets.

As another example, you could have an increase in assets if you have a parallel increase in liabilities. Such as in the case of a business loan which increases your assets.

The Double Entry System of Accounting

GnuCash uses what’s called a double-entry accounting system. This is a formal system that’s a worldwide standard for accounting.

What a double-entry system means is that every single transaction or every record in GnuCash has at least two records that are going on behind the scenes. There are two transactions, a debit, and credit, and they have to add up to the same amount.

Most of the time, you don’t see this happening. For example, when I create an invoice, you’re sending it out to a customer, and an account of yours will get debited. That account is the accounts receivable account. It’s the account that’s waiting for this money.

When your customer pays you, that payment gets credited from your accounts receivable, and it’s being debited into your company’s checking account, which is where the money is arriving.

Every single transaction needs this double system to tell it where to go and where it’s coming from. In fact, different types of accounts will handle debts and credits differently. In some accounts, a credit means the account is decreasing in value, and in others, it means the account is increasing.

The question is, where’s the money being credited? Where’s it being debited? It will make a lot more sense as we go along.

1. Installing GnuCash

Before you can use GnuCash, you have to install it on your desktop or laptop computer. The download is available free of charge. To download the latest stable release of the installer go to gnucash.org. Gnucash can be installed on a windows or mac computer, desktop, or laptop. GnuCash is available for older operating systems such as Windows 7, Vista, XP, and earlier Mac operating systems.

Beginners Guide to Bookkeeping

Are you making money from self-employment? If so, then you are required to keep good accounting records. IRS Defines Self-Employment Income, as income that is earned from carrying on a “trade or business” as a sole proprietor, an independent contractor, or some form of partnership.

Small businesses can hire a Bookkeeper, use a Bookkeeping service, or do their bookkeeping themselves manually or with the help of computer software. No matter what you decide you should have a basic understanding of bookkeeping principles.

Difference between an Accountant
and a Bookkeeper

Bookkeeping is the first part of the accounting process, so the work of a bookkeeper and accountant often overlaps. 

The difference between an Accountant and a Bookkeeper is an accountant is a professional who handles the bookkeeping and prepares financial documents like profit-and-loss statements, balance sheets etc. They perform audits of your books, prepare reports for tax purposes, and handle all the financial information that’s part of running your business.

Bookkeeping focuses on recording and organizing financial data, while accounting is the interpretation and presentation of that data.

Some small businesses will opt for an accountant depending on how complex their tax reporting and accounting needs are. An accountant’s services can get expensive for a small business. To cut costs some small businesses will use an accountant at the end of the year to audit their bookkeeping records and prepare their tax returns.

Getting Started:

In business, keeping records is crucial for a variety of reasons, including keeping track of the progress of a business, preparing tax returns, and keeping a record of receipts and deductible expenses which are all apart of the bookkeeping process.

Proper record-keeping for small businesses makes the process easier and keeps you compliant with the law. It will also help you in the long run, to be prepared in case of an IRS audit.

Most importantly, records can show whether your business is improving, which items are selling, or what changes you need to make. Good records can increase the likelihood of business success. 

Opening a business checking account

You should always use a separate business checking account for business to keep track of income and expenses only. Do not use a personal checking account for business

Identify sources of your income

 Your records can identify the sources of your income. You need this information to separate business from nonbusiness receipts and taxable from nontaxable income. 

Keep track of your deductible expenses

Unless you record them when they occur, you may forget expenses when you prepare your tax return.

Keep track of your basis in the property

Your basis is the amount of your investment in property for tax purposes. You will use the basis to figure the gain or loss on the sale, exchange, or other disposition of property, as well as deductions for depreciation, amortization, depletion, and casualty losses.

The Type of Records You Should keep

The business you are in affects the type of records you need to keep for federal tax purposes. Your business records must be available at all times for inspection by the IRS.

You will need all Documents to Support items reported on your tax returns. If the IRS examines any of your tax returns, you may be asked to explain the items reported. A complete set of records will speed up the examination. 

Supporting Documents

Purchases, sales, payroll, and other transactions you have in your business will generate supporting documents.

Supporting documents include sales slips, paid bills, invoices, receipts, deposit slips, and canceled checks. These documents contain the information you need to record in your books. It is important to keep these documents because they support the entries in your books and on your tax return. You should keep them in an orderly fashion and in a safe place. For instance, organize them by year and type of income or expense.

The following are some of the types of records you should keep:

  • Gross receipts are the income you receive from your business. You should keep supporting documents that show the amounts and sources of your gross receipts. Documents for gross receipts include the following:
    • Cash register tapes
    • Deposit information (cash and credit sales)
    • Receipt books
    • Invoices
    • Forms 1099-MISC
  • Purchases are the items you buy and resell to customers. If you are a manufacturer or producer, this includes the cost of all raw materials or parts purchased for manufacture into finished products. Your supporting documents should show the amount paid and that the amount was for purchases. Documents for purchases include the following:
    • Canceled checks or other documents that identify payee, amount, and proof of payment/electronic funds transfer
    • Cash register tape receipts
    • Credit card receipts and statements
    • Invoices
  • Expenses are the costs you incur (other than purchases) to carry on your business. Your supporting documents should show the amount paid and a description that shows the amount was for a business expense. Documents for expenses include the following:
    • Canceled checks or other documents that identify payee, amount, and proof of payment/electronic funds transfer
    • Cash register tapes
    • Account statements
    • Credit card receipts and statements
    • Invoices
    • Petty cash slips for small cash payments
  • Travel, Transportation, Entertainment, and Gift Expenses
    If you deduct travel, entertainment, gift, or transportation expenses, you must be able to prove (substantiate) certain elements of expenses. 
  • Assets are the property, such as machinery and furniture, that you own and use in your business. You must keep records to verify certain information about your business assets. You need records to compute the annual depreciation and the gain or loss when you sell the assets.
  • Documents for assets should show the following information:
    • When and how you acquired the assets
    • Purchase price
    • Cost of any improvements
    • Section 179 deduction taken
    • Deductions taken for depreciation
    • Deductions taken for casualty losses, such as losses resulting from fires or storms
    • How you used the asset
    • When and how you disposed of the asset
    • Selling price
    • Expenses of saleThe following documents may show this information.
    • Purchase and sales invoices
    • Real estate closing statements
    • Canceled checks or other documents that identify payee, amount, and proof of payment/electronic funds transfer

Prepare your financial statements

You need good records to prepare accurate financial statements. These include income (profit and loss) statements and balance sheets. These statements can help you in dealing with your bank or creditors and help you manage your business. 

  • An income statement shows the income and expenses of the business for a given period of time.
  • A balance sheet shows the assets, liabilities, and equity in the business on a given date. 

Prepare your tax return

Last but not least, you need good records to prepare your tax returns. These records must support the income, expenses, and credits you report. Generally, these are the same records you use to monitor your business and prepare your financial statement. 

Why Start a Business on The Internet?

The answer is simple, more people than ever are unemployed and looking for ways to make money / start a business from the comfort of their homes. What better place to start a business than online? The Internet offers anyone and everyone, the same opportunity to start a low-cost, highly profitable business online on only a shoestring budget!.

Do away with the mentality that says you don’t have enough knowledge or money to start a business on the Internet. If you really want to make money online, there is nothing stopping you, the Internet offers unlimited money-making possibilities!

Opportunity is knocking, ordinary people are making extraordinary money online and becoming millionaires almost overnight. There has never been a better time to start an online business than right now!

I started on a shoestring budget and earned money beyond my expectations! Step out of your comfort zone, and begin to think like a millionaire! Even if you are an ordinary Joe with Macy’s taste and only K-mart money in your pocket, you can start and succeed in an Internet business.

During the last 20 or so years, large numbers of people have chosen to market their skills and talents from home. Recent studies estimate that as many as 20 % of all new small business enterprises are operated out of the home, and this trend is growing.

Internet Users Profile:

Research has proven that high on Internet users to do list is Social Networking. Just look at Facebook, Twitter, Reddit, and youtube, they all hold high rankings on the Internet. Facebook is #1 on the charts. Once people got a hold of Facebook it took off like a bat out of HE- double hockey sticks. The News and up to date happenings are also a crowd-pleaser, twitter has been known to light up like a Christmas tree, with people exchanging tweets about what is affecting people right now, in various areas of the world.

YouTube is like having your own TV program and it has brought everyone out of the closet, from mom and pop to aunt Sally, in search of stardom. YouTubers produce millions of how-to tutorials any subject you can think of. For some people youtube is the first place Internet users go, to learn something new. Informational digital products are also big business on the Internet.

Internet Users love the convenience of being able to shop from home online due to the convenience and the savings found on various products on the Internet. It’s estimated that consumers spend over $200 billion on all types of Internet-based goods and services. What this tells us is that a large percentage of Internet users love to socialize online, they are always in search of information and they don’t mind spending money on online goods and services!

Finding Your Money Making Idea:

Now as you begin to search for your money-making niche idea you will have to do your research. Your job is to figure out how to use what you are passionate about and knowledgeable about, to come up with a money-making idea that will coincide with what turns on the bells and whistles of Internet surfers.

To generate a good business idea you have to ask yourself:

  • What is it I am good at? Ideas are all around you.
  • What are you passionate about?
  • What problems or issues do you see on the Internet you have a solution for?
  • Take a moment and think about how you can turn your talents and/ or solutions to world problems into a money-making business idea?
  • Begin by writing down all the things you are passionate about and knowledgeable about.

My Humble Beginnings

When my husband and I first started selling on the Internet, I looked at the fact that my husband was good at woodworking and had a passion for it. I had extensive knowledge of how to use the Internet for business, my creative juices begin to go into overdrive as I thought about his skills and my knowledge of the Internet.

I did a search of the Internet to see what type of wood products people were selling online. At that time wooden boxes were a popular product and the purchase price was pretty high. A new business idea was birthed. I thought about all the crafters in need of wooden products that could benefit from the lower cost we could provide since we were working out of our home, and our overhead expenses were very low.

To make a long story short we started the business offering our very own unique designs of unfinished wooden products. The business did quite well and it took off quickly!

One of our wooden boxes was featured on the Martha Steward Show back when she was hosting a craft show on TV. Our Wooden Box business was also featured on an episode of Extreme Home Makeover!

Bethlehem Salvation Army Offering Free Gifts For The Holidays For Families in Need..

The Bethlehem, Pa Salvation Army Toys for Tots program will be distributing toys and other gifts through the local Bethlehem Salvation Army Community Corps. Toys will go to deserving boys and girls in the local community. If you are interested in receiving holiday assistance or becoming a sponsor to adopt a family in your area please contact your local Bethlehem Salvation Army Community Corps.