On 11/23/2017 2:17 PM, Suresh Saragadam wrote:
I am working on a small construction work where i need to record my
expenses for both material and men (labour)
i am purchasing cement on credit(Loan) that is accounts payable i.e.
liability Here i need to create liability account for cement under
material expenses, but i am unable to create a liability account for
cement under material expense account so that i can record total
material spend including liability for cement this is very minimum
accounting requirement. Regards Suresh
As others have explained, this is a misunderstanding about basics.
In double entry bookkeeping, each transaction has net equal debits and
credits. When you pay an expense, you are often writing a check. In
other words, the credit side of the transaction would be the checking
account. But there are other possibilities for what the credit side
might be << the debit side of the transaction of course being the
expense "materials".
1) You might be paying with a credit card. Go back to that "often". In
some cases (for some sorts of expense) you might ALWAYS be using a
credit card. For example, these days, with "self serve" gas stations,
you might always be buying gasoline that way.
2) In THIS case, the vendor is allowing you you to "pay on account" (not
unusual in business*). So under LIABILITIES you set up and account for
this vendor showing what you owe. When you pay on this account NOT an
expense (you already accounted for that when the liability was assumed)
but a transaction where this liability is the debit side (for an account
if type debit, that is a reduction in the debt) and the credit side your
checking account you used to pay that bill.
Michael D Novack
* It is not that unusual (for businesses) to be dealing with vendors on
a basis like "net 30 days, thereafter 1% per month" or even with a
discount for paying within some defined amount of time.
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