In general, I wouldn't bother entering starting balances for income and expense accounts from before the period I am accounting for. Traditionally, those accounts were temporary, and at the end of the accounting period the balances would be reset to zero, being transferred to equity. That isn't necessary in GnuCash (because for reporting purposes GnuCash can calculate what would have been transferred and include that in the reports), but it's a good way to think of it in terms of fundamentals.
But to understand the situation you have, consider what happens when you get income or pay expenses. Normally, when you receive income (a credit), you also increase an asset (a debit) by the same amount. My salary is direct-deposited, and my bank balance goes up. If I put in a starting balance into an income account (say, I'm starting using GnuCash on April 1st, and I'm putting in my YTD salary), but don't increase an asset, then the money from that income no longer exists, and it has to go somewhere. In your case, it's decreasing your equity. It's effectively the same as getting a $100 bill and losing it on the street. You record you got $100, but you don't have it anymore, so your equity goes down by $100. Expenses work just the opposite: when you pay an expense (a debit), you also decrease an asset (a credit) by the same amount. I buy breakfast at the local cafe by debit card, and my bank balance goes down. If I put in a starting balance into an expense account (say, I'm starting using GnuCash on April 1st, and I'm putting in my YTD breakfast payments), but don't decrease an asset, then the money I spent never existed,and it has to come from somewhere. In your case, it's increasing your equity. It's effectively the same as eating a $100 dinner and having it comped by the restaurant. You record you spend $100, but you didn't actually spend the money, so your equity goes up by $100. In the end, it all comes out as a wash: The reports will add your income starting balance and subtract your expense starting balance as part of computing your "retained earnings", which will be added to your equity. So the income starting balance transaction will cancel itself out, as will the expense starting balance transaction. On Sat, Mar 24, 2018 at 4:10 PM Lori Norden <lnor...@mchsi.com> wrote: > I am starting Gnucash in the beginning of the year. As I’m entering the > beginning balance for each income and expense account, a transfer is being > made to my Equity Opening Balance account. > > For income beginning balance entries – credits income; debits Equity > Opening Balance > For expense beginning balance entries – debits expense, credits Equity > Opening Balance > > The problem is my Equity is reduced by the amount of net income I made as > of the beginning date, but should be increased. > > Should I be offsetting the beginning balances for income and expense to > something other than Equity Opening Balance? That’s what I thought the > instructions indicated I should do. > > Thanks for your help > > Sent from Mail for Windows 10 > > _______________________________________________ > gnucash-user mailing list > gnucash-user@gnucash.org > To update your subscription preferences or to unsubscribe: > https://lists.gnucash.org/mailman/listinfo/gnucash-user > If you are using Nabble or Gmane, please see > https://wiki.gnucash.org/wiki/Mailing_Lists for more information. > ----- > Please remember to CC this list on all your replies. > You can do this by using Reply-To-List or Reply-All. _______________________________________________ gnucash-user mailing list gnucash-user@gnucash.org To update your subscription preferences or to unsubscribe: https://lists.gnucash.org/mailman/listinfo/gnucash-user If you are using Nabble or Gmane, please see https://wiki.gnucash.org/wiki/Mailing_Lists for more information. ----- Please remember to CC this list on all your replies. You can do this by using Reply-To-List or Reply-All.
