Books / Accounting Periods

API: Book

Implementation Overview

       Linas Vepstas <linas@linas.org> December 2001
             Last Updated August 2003

A top, unimplemented request for GnuCash is the ability to 'close the books', that is, to add support for 'accounting periods'. Partial support for books has been added to the GnuCash engine; and a GUI is partially finished. This file reviews the implementation design choices and the current design status.

Definition

An accounting period or 'book' is a set of accounts and transactions that, once closed, must never be modified again. Books are typically closed once a quarter, or once a year. Generating a report from a closed book tells you how well you did for that year (or quarter). The provision against modifying a closed book helps ensure correctness, and discourages cheating. Note that the closing balances of a closed book must be carried forward as the opening balance in the next book. (But only for asset, liability and equity accounts. Opening balances are zeroed for income and expense accounts.)

Note that the correct handling of depreciation, capital gains and other similar accounting concepts requires 'Lots' to be correctly handled. Lots are a way of identifying that an item bought in one transaction is the same as that sold in another transaction. When a book is closed, the entire lot must be brought forward, and not just the account balance, because depreciation, capital gains, taxes, etc. depend on the dates of the originating transaction. See 'lots.txt' for details.

API: Lots: Core Function for AR/AP, Inventory, Stock Lots, Cap Gains

Requirements

Must have good performance (large data files usually mean poor performance). Use the idea of 'books' to prevent file bloat. Must have access to historical data. Must be able to create bar-charts, graphs, reports of multi-year data (i.e. create reports spanning multiple books).

Period

Status

The top-level structure that holds references to all of the data in a book is implemented in src/engine/qofbook.c. The routines to split one book into two, automatically setting account balances, etc. are implemented in src/engine/Period.c. The actual implementation used is "Plan A" from the list of choices below. The actual implementation is not yet complete, see "Implementation Notes" at bottom for the current status.

Possible Solutions

API: Query: Querying for Objects

Listed in order from worst to best:

Plan F:

Simply 'delete' old transactions, and adjust the equity to make up for this. More specifically: Split one file into two, with only 'old' transactions in one, and only 'new' transactions in the other.

I believe that this can be 'easily' coded by creating a second instance of a qofbook structure in memory, copying all the account info into it, and using Query.c to copy in only the 'old' transactions. (and v.v. using Query.c to delete the old transactions in the other copy.) Then, look up the ending balance on all asset/liability accounts in the 'old' book, and create new transactions in the 'new' book that transfers that balance amount to an equity account. The transfer description is, of course, 'opening balance'. Balances of income/expense accounts are zeroed out.

I believe this code would be easy to write in C or scheme. There may be a few bugs/difficulties lurking in qofbook that might trip things up. Also, at a minimum, there needs to be a GUI dialog, asking for the date on which to close the books.

(A fancy but optional GUI dialog/wizard might ask 'which equity account to transfer the opening balances, and what the description should say. This GUI is optional, since, after all, these can be tweaked by hand, and its only done once a year or once a quarter.)

(An even fancier GUI would remember how often the books should close: 1,2,3,4 times a year, 12 times a year, whatever, and 'remind' you when that happens.)

(Another 'fancy' feature might be to not allow user to close book until all 'old' transactions have been cleared/reconciled. But that might be a bit much for non-bank accounts).

API: Transaction, Split

Pros & Cons of plan F:

• pro: simple. The simplest option.
• pro: truncated file loads much faster
• pro: old/irrelevant accounts can be safely deleted from newest file (while still being preserved in old files).
• con: impossible to generate 5 year reports, multi-year graphs. This would really hurt, esp, when tracking stocks/mutual funds/retirement accounts over a number of years.

I think this last one is the Achilles heel, the torpedo in the rudder that sinks the boat.

Plan D

As above, but instead of deleting, add a kvp to each transaction stating '/book/closed-on=12.31.2000'. Then modify the default query for the registers so that the only displayed transactions are those that are not part of a closed book. Modify the Query GUI dialog to add 'book' as a query parameter.

• pro: easy access to historical record
• con: slow loads; file size not reduced.
• con: dealing with opening balances, equity, is icky.
• con: can't delete/hide old/stale accounts.

We move on....

Plan C

As in plan F, but instead of creating two books, clone the account tree into two: 'old' and 'new'. The old and new accounts are identical, except that they get different guid's. Every account in the old tree gets a kvp in it: '/book/closed-on=12.31.2000'. We don't copy or delete any transactions; instead, we reclassify them: Old transactions are transfers between old accounts, new transactions are transfers between new accounts.

The account summary needs to be modified to show only 'new' accounts by default. The transfer-from pop-down needs to be modified to show only 'new' accounts only, and never the old accounts.

Transfers between closed and open accounts are never allowed (this is validated/forced in the engine). Opening balances are handled just as in plan 'F'. User can only view data in closed books, and not change it.
If we allow books to be re-opened, then the 'starting balance' equity transfers must be deleted. We can save 're-opening' for some future day.

The 'starting balance equity transfers' must have a kvp pair in them: '/book/closing-balance-of-account-guid=0xdeadbeef'. This way, we know that this transaction is associated with the closure of the book on some specific account, and that way, we can find this transaction someday in the future, if we ever need to.

Each new account needs to point back at the copy that is its 'old' self. (these don't have to be C pointers, they could be some suitably clever kvp: '/book/previous-guid=0xdeadbeef') This continuity is needed in order to be able to create reports that scan over multiple books. The Query.c interface needs to be modified so that it searches only new accounts, or it searches new accounts and their corresponding 'old' copies.

(There are three ways to deal with this account continuity issue:

• don't deal with it in query.c: force various GUI dialogs to explicitly formulate queries involving the /book/previous-guid string.
  but this gets messy in the GUI's. May lead to excess cut-n-paste of similar code between different GUI's.
• 'hide' the distinction between 'old' and 'new' in query.c: the users of query.c need only to specify a boolean flag: search closed books: yes/no. However, this is conceptually ugly, and prevents query from doing low-level queries on specific books.
• create query utility wrapper/pre-processor that takes a query, and then modifies it to search through closed books as well. This is the 'cleanest' solution. ??
• All these are delicate, and need a little more thought and exploration. Goal is to simplify queries, not burden the system with cryptic, complex code. )

I believe that if we can deal with the account-continuity issue in query.c or in a wrapper thereto, that there are no remaining issues with reporting. i.e., for any given report, we are either reporting data in closed books, or not. Different reports should have different defaults. e.g. income/expense pie chart never looks at old books. asset-value-over-time-bar-chart always looks at closed books.

• pro: safer than plan F, since we really can enforce the 'you aren't allowed to edit closed books' rule.
• pro: solves the old-account/new-account problem, since new accounts can be edited/deleted without damaging old account.
• pro: solves the historical reporting problem.
• con: queries are potentially slow, loading of file is potentially slow.

But now we have enough info to propose the final solution:

Plan A:

The kvp markup of plan C coupled to the multi-file solution of plan F. In initial startup of GnuCash, only the 'current' book is loaded.
If user asks for a report that requires data from old books, then we have to pause to load one or more of the older books.
If the books are stored as separate files, then the 'current' book needs to somehow know the filenames of the old books. I recommend against storing the books as different sections of one file, for many reasons:

• risk of corruption of old books
• bloated file size
• the single-file solution would need to invent a 'directory' so that the location of the old books in the file can be quickly found and lseek()'ed or mmap()'ed. But why invent a directory? Unix already provides directories!

I recommend that every book get a unique guid. The current book would know the guid's if its closed book progeny. The filename would incorporate some compressed version of the guid (and/or the date of closure).

Optional: every book gets not only a unique guid, and also stores some meta-information (as book-level kvp's):

/book/title=some-user-supplied-name
/book/notes=user-supplied-descriptive-comments
/book/start-date=xxx
/book/end-date=xxx
/book/previous-book-guids=(list 0xa 0xb 0xc)
/book/accounting-period=enum {none, week, month, quarter, trimester, year}

Pro's & Con's

I am not aware of any con's to plan A at this point.

Implementation Overview

Plan A has been implemented in the engine. To quickly summarize:

• Partitioning involves splitting one book into two, called the "old, closing book", and the "current open book".
• Accounts are copied between old and new books. One of the copies is issued new GUID's, but the rest of the account data is copied. KVP pairs are then added so that each copy points at the other, and can thus be easily found. The "gemini" KVP keyword is used. The opening balance is zeroed for income accounts. A transaction is created to set the correct opening balance on asset accounts. The transaction is a transfer from equity. An equity account is created automagically, if needed.
• Transactions. Transactions are partitioned, and end up either in the old or the new book. Splits move with transactions. Note that some transactions, associated with open lots, may be kept in the new book (See below).
  
• Lots. If a transaction has a split in an open lot, then that transaction is not moved to the closed book. It needs to stay with the open book. If a lot is closed, and all of the other lots associated with all of the transactions in this lot are also closed, then the lot may be moved to the closed book (and all of the other associated lots must then also be moved).
• Prices. Prices are sorted into the new and old books according to the date on the price.
• Scheduled transactions/recurring transactions. These are left in the new book, untouched. They are not copied into the old book, and no trace of their existence is left in the old book.
• Business Objects. Not implemented.

Implementation Notes

• src/engine/Period.[ch] Implements the main logic to split one book into two, and populate it with the appropriate keys, markup, etc. and to carry balances forward, etc.
• src/engine/gnc-lot.[ch] Implements accounting Lots.
• src/engine/Scrub2.[ch] Implements simple FIFO for lots. Data is scrubbed with respect to this FIFO before the books are closed. Commodity accounts (e.g. stock accounts) must have a coherent Lots structure before books can be closed. The scrubber makes sure there's nothing hanging out.
• src/gnome/druid-acct-period.[ch] Implements a druid interface to allow user to specify book closing dates, add a title and notes to a book, and walk through the process. Uses FreqSpec.[ch] and the widget in gnc-frequency.[ch] to allow the user to specify the frequency of book closings.
• The XML-file backend can store multiple books in one file. There is currently minimal support for writing out multiple books, one per file (this enables faster load, by not loading old books).
  There is currently no support for loading multiple books from multiple files.
• (Details about the dbi backend are missing.)

ANNOUNCE: Book Closing Beta 2

Books AKA Accounting Periods can now be closed by going to the 'Action' menu on the main window, and selecting 'close books'. This will popup a druid that will allow you to select closing dates. Books are closed one at a time: after each one, you can go back and alter the close date.
A book is 'closed' by moving transactions and prices earlier than the indicated date to a separate file.

As a side-effect of book closing, capital gains (losses) will be automatically computed using a FIFO accounting method. Stocks or other non-cash assets that haven't been sold will remain in the currently open book, even if the purchasing transactions were made a long time ago.

The biggest drawback to the automatic computation of the gains/losses is that there is no GUI to specify alternate accounting methods (e.g. LIFO, or hand-picked lots, etc.) There is basically no practical way to 'undo' the results of the gain/loss computations.

The other main drawback to book closing is that this will prevent multi-year (multi-period) reports & graphs from being generated. The old data will be in separate files, and there is currently no way to load several files at once.

Open Issues/Questions that Need Discussion:

• How to handle business objects? e.g. vendors, customers should be copied into both old and new books. But invoices should be in one or the other. Need to document which is which. Copy: customer – ok, has guid, has for-each employee
  No-op: address – do nothing
• Discussion Q: What should the naming convention be for the different books? When the XML file backend is used, different books need to be stored as different files (in order to avoid the performance penalty of a large file load). Currently, what's implemented is
  book-1dc750aa3e6fd045c13ac8afb1a9ac03-my-gnucash-file.xac.gml
  where the number is the GUID of the closed book (needed to be able to quickly find the book/file) and 'my-gnucash-file.xac' is the name of the original file whose books were closed.
  Need to change the name to include the word "archive".
• Discussion Q: When saving books, make the book title part of the book name (user convenience).
• Should closed books be allowed to have unreconciled transactions? Answer: probably. Should there be a warning?

Open Issues / ToDo

• Change GUI to allow user to specify a default equity account for dealing with opening balances. Should be done with kvp markup.
• Fix crash when exiting gnucash after closing books.
• The filename of the old, closed books should probably be saved in the KVP tree of the current open book. This need be done only from the file backend.
• Need to mark closed book as unalterable, and respect that markup. I think there's a 'closed' flag in the book, but I don't think its respected.
• The book closing GUI (druid-acct-period.c) needs to save/restore period end date (the FreqSpec) to KVP on open book. This would be easy once we have a freq-spec-to-kvp and freq-spec-from-kvp routines.
• Handling of lots in book closing is implemented but is poorly tested. Need to write test cases. Also test cases for prices in book closing.
• price-saving in the SQL backend is probably broken, its certainly untested. Need to remove old deprecated price-lookup mechanism, and replace w/ qofquery.
• Need to provide for loading of closed books, because this is needed for reports.
• Handling of multi-book reports ??? Need to work out the recommended way of making this happen....
• Have some way of remembering the quickfill text from older books.
• Possibly neat idea: Book closing, as currently implemented in the GUI, is driven entirely by the date-posted. There is no (planned) interface to allow you to exclude some certain transactions from a particular closing (although it would be 'easy' to add this: right before I close a book, I have a list of transactions which can be added to/removed from).
• add 13-period support to FreqSpec and the FreqSpec widget.
  e.g. from the mailing list: One of the calendars my company uses is like this: 13 periods 1st period begins jan 1st, partial first week plus 4 weeks. 2nd - 13th period begins on a sunday every four weeks. 13th period - 4th week may be less than full week because it ends on 12/31.
  For 2003:
  01. 01/01 - 02/01
  02. 02/02 - 03/01
  03. 03/02 - 03/29
  04. 03/30 - 04/26
  05. 04/27 - 05/24
  06. 05/25 - 06/21
  07. 06/22 - 07/19
  08. 07/20 - 08/16
  09. 08/17 - 09/13
  
  1. 09/14 - 10/11
     
  2. 10/12 - 11/08
     
  3. 11/09 - 12/06
     
  4. 12/07 - 12/31