Michael, you have convinced me that it does make more sense to treat the contributions as an asset rather than a reduction in equity.
David On Mon, 2025-01-20 at 12:21 -0500, Michael or Penny Novack via gnucash- user wrote: > I think your problem is misunderstanding "equity". > > You, as owner of these businesses have a total equity. Each of these > businesses has an equity. You are imagining that because was on one > set > of books (your equity included the businesses) when you split YOUR > equity is reducing. You are forgetting the fundamental equation, > Assets > = Liabilities + Equity and that you are allowed to add to one side of > the "=" if you add the same to the other. > > When you split off a business, ITS assets, liabilities, and equity > are > going to another set of books (you see that) BUT at the same time its > equity is appearing on YOUR books as an asset (your investment in > this > business, in the amount of its equity) and of course an increase in > your > equity in the same amount. In other words, the split off of the > business > has decreased and increased YOUR equity by the same amount. No change > to > YOUR equity. > > Michael D Novack > > > > > On 1/19/2025 8:12 PM, David Cousens wrote: > > Michael, > > > > My assumptions and reasonong in formulating the answer were that > > the > > total equity of the owner after the split comprised the Equity of > > his > > personal accounts plus the Equity of the business accounts. That > > is > > the owner of the business and the business are separate entities > > for > > accounting purposes. The real purpose of spliting the accounts is > > then > > to also split the equity which was previously just in the personal > > books before the business books were established and transfer the > > appropriate component of the equity and assets to the business > > entity. > > The process of splitting the books necessarily involves a transfer > > of > > equity from one set of books to another. > > > > By recording the business as an asset in the personal accounts no > > transfer of equity to the books of the new entity is achieved where > > there is a transfer of funds from say a bank account in the > > personal > > accounts to another asset account for the business in the personal > > set > > of books. > > > > Whereas crediting the appropriate asset account from which funds > > are > > transferred to the business (decreasing its balance) and debiting > > an > > Equity account (decreasing its balance) in the personal books > > recording > > contributions to the business decreases the equity in the personal > > books and then the second entry entry set in the business' books > > completes the transfer of equity to the new set of books for the > > business establishing the asset and equity transfer from the > > personal > > books to the business books. > > > > David > > > > > > On Sun, 2025-01-19 at 10:24 -0500, Michael or Penny Novack via > > gnucash- > > user wrote: > > > > You also own the business. > > > > > > > > I would set up an account in Equity in your personal accounts > > > > "Contributions to xyz business" and a similar Equity account in > > > > the > > > > business books "Owners contributions". > > > More generally, you own part of this business. > > > > > > Why under Equity? Why different from any other investment. I'd > > > expect > > > to > > > be putting my ownership share of this business under Assets. > > > Otherwise > > > the same. If you use personal funds or credit on behalf of the > > > business, > > > the that represents a change in your investment. > > > > > > But yes, in the business's books, ownership shares under equity. > > > > > > Michael D Novack > > > > > > > > > _______________________________________________ > > > gnucash-user mailing list > > > gnucash-user@gnucash.org > > > To update your subscription preferences or to unsubscribe: > > > https://lists.gnucash.org/mailman/listinfo/gnucash-user > > > ----- > > > 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 > > ----- > > 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 ----- Please remember to CC this list on all your replies. You can do this by using Reply-To-List or Reply-All.
