When entering data in GnuCash, you should be aware of the 3 levels of organization in which GnuCash divides your data: files, accounts and transactions. These levels are presented in their order of complexity, one file contains many accounts and one account contains many transactions. This division is fundamental to understanding how to use GnuCash.
GnuCash stores information at the highest level in files. A file can be stored on your computer as a single XML file.
With the XML file format, GnuCash stores your data in an XML data file, usually in compressed format (although this can be changed in preferences).
You will need one main file or database for each set of accounts you are maintaining. To learn how to create and manage GnuCash files, see Creating and Saving Files.
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If you think you might need more than one set of accounts, you might want to consult a professional accountant or bookkeeper before proceeding. Most users will probably have only one data file. | |
Backup files and log files are automatically generated by GnuCash when appropriate. Backup and log files are described in Backing Up and Recovering Data.
An account keeps track of what you own, owe, spend or receive. Each GnuCash file can contain any number of accounts, and each account can contain many sub-accounts upto an arbitrary number of levels. This simple feature gives GnuCash much of its power in managing your finances, as you will see in later chapters.
Examples of accounts include: checking accounts, savings accounts, credit card accounts, mortgages, and loans. Each GnuCash account tracks the activity for that “real” account, and can inform you of its status.
In addition, accounts are also used to categorize the money you receive or spend. For example, you can create expense accounts to track the money you pay on utilities or groceries. Even though these are not accounts that receive statements, they allow you to determine how much money is being spent in each of these areas.
Accounts will be covered in more detail in Chapter 3.
A transaction represents the movement of money among accounts. Whenever you spend or receive money, or transfer money between accounts, that is a transaction.
Examples of transactions are: paying a phone bill, transferring money from savings to checking, buying a pizza, withdrawing money, and depositing a paycheck. Chapter 4 goes more in depth on how to enter transactions.
In double entry accounting, transactions always involve at least two accounts–a source account and a destination account. GnuCash manages this by inserting a line into the transaction for every account that is affected, and recording the amounts involved in each line. A line within a transaction that records the account and amount of money involved is called a split. A transaction can contain an arbitrary number of splits.
Splits in transactions will be covered in Split Transaction