Reconciling your Gnucash account simply means you are matching the income and expense transactions you entered into Gnucash against your business banking checking account for accuracy which is very important that everything you enter into Gnucash balances with your banking statements.
Double-checking, your records against your banking account transactions each month will give you a better understanding of your transactions such as uncashed checks and undeposited amounts owed to you from third parties.
Gnucash can help you catch any discrepancies between your Gnucash business transactions data and your business banking account monthly statements.
In the tutorial, you will learn how to manage a credit card account in GnuCash to keep track of all your business credit card expenditures.
It is not uncommon to use a credit card for some of your business transactions after all a credit card account is like a short-term loan that comes in handy when you have a business, but then you .eventually have to pay back the money, often with interest.
Credit card transactions are a liability because it is money you owe. In GnuCash The purchases you make with a credit card are classified as expenses.
You have a couple of options when entering credit card transactions. The simplest method is to only track monthly payments to the credit card company.
This method only requires you have a checking account, a credit card liability account, and a credit card expense account.
The obvious limitation of this simple credit card setup is that you cannot see where your money is going. And since you are tracking business expenses you want to be as transparent as possible, when it comes down to your business expenses. If not for yourself for tax purposes.
Once you Apply the business settings the Save As Dialog Screen should appear. In this next step of the business accounts setup, you will name your accounting file and create a folder to hold the files.
This step is crucial because GnuCash generates a lot of files and if this step is not done properly, your files will end up outside of the folder intended to hold the business files and all mixed in with your files in your document folder. When done right your files will be saved and organized into the folder specifically created to hold your Gnucash files.
Notes: The chart of accounts represents the different types of business expenses and income you can expect to encounter in the course of your business. For instance, the opening balance should be your very first entry. You only have to enter this transaction one time when you first start using GnuCash.
The opening balance should reflex the ending balance of your last business checking account statement or the newly deposited amount if you have just opened a new business checking account.
In Gnucash a transaction with only two splits is called a simple transaction., since it only involves the current account and a single chart of account. An example of two splits in the tutorial is with the opening balance transaction of the 500.00, the two splits involved are the checking account and the equity: opening balance.
Every transaction in GnuCash has at least two splits, but a transaction can have more than two splits. A transaction that involves three or more accounts is called a split transaction. The need for 3 or more splits in a transaction occurs when you need to split either the “from” or the “to” account into multiple transaction accounts.
Before you begin using Gnucash it is a good idea to set your accounting period. Even before you begin a new business you are required by the IRS to select your accounting period for reporting profit and loss. For IRS purposes, a “tax year” is an annual specified period of time for keeping your business records and reporting income and expenses.
Two methods used for an accounting period and approved by the IRs are.
A Calendar year – 12 consecutive months beginning January 1 and ending December 31.
A fiscal year’ which does not start on Jan1 and necessarily end on Dec31.
Some businesses and organizations prefer to keep records based on a ‘fiscal year’. For most small businesses, their accounting period will be based on the calendar year, 12 consecutive months beginning January 1 and ending December 31.
By setting up your accounting period preferences in Gnucash you are in essence telling the system this is the Starting date and ending date I want to use for my business accounting profit/loss calculations and net assets calculations. This is so important in bookkeeping, that you are able to keep track of the business’s profit and loss and provide evidence to the IRS based on your annual accounting period.
Not only can Gnucash accounting period preferences be used to produce reports based on the dates you set, but it can also be used to generate specific date range reports. This can be helpful to you when you want to know how your business finances are doing based on a specific period of time.
How To Setup The Accounting Period
In Gnucash the preferences feature is used to set up your accounting method and period. To begin select Edit from the menu bar, and when the menu opens select preferences.
By default, the accounting period is the first option. You have two choices here Relative and Absolute, choose Relative if your business uses the calendar year accounting period. 12 consecutive months beginning January 1 and ending December 31. Pictured below are the stand settings for a calendar year accounting period.
Select Absolute if your business uses the fiscal year accounting period. Both Relative and Absolute uses the dates you specify as the starting date and the ending date for profit/loss calculations and net assets calculations. The only thing you would do differently if your business uses the fiscal year accounting period is select absolute instead of Relative and set the start and ending options and dates specific to your business accounting period.
Generating Reports
The accounting period is also used for financial reports in GnuCash. You can use the accounting period to generate reports based on a specified date range. To view a standard report based on the present relative accounting period settings. Select reports on the menu bar and when the menu opens, select Income and expense, and when the submenu opens select profit and loss.
Here you have the Profit and loss report based on the dates set in preferences for the Relative accounting period.
Each time you open GnuCash, you will find that the Tip of the Day screen pops up, ready and available to offer helpful tips about using the program: These helpful tips provide useful information for beginning users. To view more of the tips, click on next to continue viewing the tips. When you have finished Click Close to close out the Tip of the Day.
Now that the program has been installed it is time to set up the chart accounts. The chart of accounts, or what Gnucash refers to as the account tree is what you will use to keep track of your business income and expenses.
To begin, open the Gnucash program by clicking the Gnucash shortcut icon on your desktop. The program created the icon when you installed the program, as long as you left that option checked. If you don’t see the shortcut on your desktop look for the program in your Windows start menu.
Gnucash can be installed on a windows, mac computer or Linux desktop, or laptop. GnuCash is also available for older operating systems such as Windows 7, Vista, XP, and earlier Mac operating systems as well the latest operating systems windows 8 and 10 and Apples High Sierra
In this tutorial, I will be talking about how to enter a split transaction and the difference between a simple and a split transaction.
In the previous tutorial, I entered a simple transaction. In Gnucash a transaction with only two splits is called a simple transaction., since it only involves the current account and a single chart of account. An example of two splits in the previous tutorial with the opening balance transaction of the 500.00, the two splits involved are the checking account and the equity: opening balance.
Every transaction in GnuCash has at least two splits, but a transaction can have more than two splits. A transaction that involves three or more accounts is called a split transaction. The need for 3 or more splits in a transaction occurs when you need to split either the “from” or the “to” account into multiple transaction accounts.
