Gnucash 2.4 Small Business Accounting: Beginner's Guide

Table of Contents

Gnucash 2.4 Small Business Accounting

Credits

About the Author

About the Reviewers

www.PacktPub.com

Support files, eBooks, discount offers and more

Why Subscribe?

Free Access for Packt account holders

Preface

What this book covers

What you need for this book

Who this book is for

Conventions

Time for action – heading

What just happened?

Pop quiz – heading

Have a go hero – heading

Reader feedback

Customer support

Errata

Piracy

Questions

1. Getting Started with GnuCash

Installing GnuCash on Windows

Time for action – installing GnuCash on Windows

What just happened?

Other operating systems

Other download locations

But first, a tip to make your life easier with auto-save

Taking the drudgery out of setting up accounts

Time for action – creating the default business accounts

What just happened?

Account hierarchy

Minimal set of accounts

Pop quiz – understanding accounts

Have a go hero – creating account hierarchies from multiple templates

Getting your business accounts done just right

Time for action – fine tuning business accounts

What just happened?

Account types

Parent accounts and top level accounts

Placeholder account

Opening balance

Pop quiz – understanding account types and hierarchies

Have a go hero – tweaking accounts

How to impress your accountant

Strengths and limitations of GnuCash

Business as well as personal accounting

Single user

Sharing a GnuCash accounts file

Accounting features not supported by GnuCash

Business functions other than accounting

Summary

2. Transactions – the Lifeblood of a Business

A quick and easy way to enter simple transactions

Time for action – entering simple transactions quickly and easily

What just happened?

Money makes the business world go round

Simple transaction

Checks and balances are good

Pop quiz – understanding transactions

Have a go hero – entering transactions

Entering a simple transaction in the account register

Time for action – entering a simple transaction in the account register

What just happened?

Navigating the account registers

Jump to account

Divide and conquer

Examples of simple transactions

Pop quiz – navigating GnuCash

Have a go hero – entering transactions using the account register

Entering a more complex transaction in the account register

Time for action – entering a split transaction in the account register

What just happened?

Visualizing split transactions

Examples of split transactions

Tips for entering split transactions

Pop quiz – understanding transactions

Have a go hero – entering split transactions

Anybody can change their mind

Time for action – editing, cancelling, and deleting transactions

What just happened?

Save time by using shortcuts

QuickFill

Data entry shortcuts

Navigation shortcuts

Computation shortcuts

Pop quiz – using shortcuts to speed up bookkeeping

Have a go hero – tweaking transactions

A feeling of déjà vu

Time for action – reusing transactions

What just happened?

Changing the register views

Deleting a transaction in different views

Text information in transactions

Transaction description

Transaction notes

Transaction number

Split action

Split Memo

Pop quiz – viewing the account register

Have a go hero – saving more data with the transactions

Summary

3. Fun and Eye-opening Part - Reports and Charts

Viewing standard reports and charts

Time for action – viewing standard reports and charts

What just happened?

Reports and charts

Income Statement (Profit and Loss Statement)

Balance Sheet

A chart is worth a thousand numbers

Other reports

Pop quiz – viewing standard reports

Have a go hero – viewing standard charts

Creating a custom report and saving it

Time for action – creating a custom report and saving it

What just happened?

Tips for customizing reports

Tips for customizing charts

Sample & Custom Reports

Pop quiz – customizing a report

Have a go hero – further customizing a report

Working with stylesheets

Time for action – working with stylesheets

What just happened?

Pop quiz – creating stylesheets

Have a go hero – creating a custom stylesheet hands on

Exporting reports

Time for action – exporting reports

What just happened?

Pop quiz – saving exported reports

Have a go hero – exporting charts in HTML format

Summary

4. How not to Get Lost in the Transactions Jungle

How not to get lost while hiking in the wilderness

Manual reconciliation

Time for action – reconciling with a printed monthly statement

What just happened?

Points to note about reconciling

Can I edit or delete reconciled transactions?

Mark split as unreconciled?

Change reconciled split?

Delete a transaction with reconciled splits?

Pop quiz – reconciling with a bank statement

Have a go hero – postponing a reconciliation

Electronic reconciliation

Time for action – reconciling with a downloaded electronic statement

What just happened?

Reconciliation FAQ

Income and expense accounts

Balancing your cash account

Credit card reconciliation

Vital point to remember when importing an OFX file

Pop quiz – reconciling with an electronic statement

Have a go hero – reconciling a credit card account

Recovering from wrong selection of account

Time for action – changing the account to import into

What just happened?

Pop quiz – changing the account to import into

Have a go hero – recovering using the backup file

Summary

5. Repetitive Work? Let GnuCash do it

Let GnuCash worry about recurring transactions

Time for action – creating a recurring transaction from the register

What just happened?

Pop quiz – creating a recurring transaction

Have a go hero – creating a recurring split transaction

A stitch in time saves nine

Time for action – triggering scheduled transactions

What just happened?

Is it Easter already?

Three different scenarios

Be cautious like an accountant

Pop quiz – triggering scheduled transactions

Have a go hero – triggering scheduled transactions

Tool to create many recurring transactions

Time for action – creating scheduled transactions in bulk

What just happened?

Schedule a transaction without knowing the amount

Scheduled Transactions FAQ

Create post dated transactions

Pop quiz – using the Scheduled Transaction Editor

Have a go hero – using the Scheduled Transaction Editor

Summary

6. Business Mantra: Buy Now, Pay Later

Credit is the lubricant for the wheels of business

Billing terms and customers

Time for action – setting up billing terms and adding customers

What just happened?

Invoices and Accounts Receivable

Time for action – keeping track of credit sales

What just happened?

Invoice printing

Receivable Aging report

List of unpaid invoices

Unpost

Pop quiz – adding customers and creating invoices

Have a go hero – finding invoices

Setting the starting invoice number

Time for action – setting the starting invoice number

What just happened?

Pop quiz – setting the starting invoice number

Processing payment

Time for action – when the check is on hand

What just happened?

Partial payment

Pop quiz – choosing an account

Have a go hero – processing a partial payment

Bills and accounts payable

Time for action – keeping track of credit purchases

What just happened?

Due bills reminder

Pop quiz – keeping track of credit purchases

Have a go hero – keeping track of credit purchases

Summary

7. Budget: Trip Planner for your Business

Budget

Time for action – creating a budget for your business

What just happened?

Start with just three budgets

Sales forecast

Expense budget

Cash flow projection

Estimating based on previous period actuals

Financial projections for investors and lenders

Budget balance sheet

Budget income statement

Budget revision

Pop quiz – creating a new budget

Have a go hero – understanding cash flow budgets

Employees and payroll

Time for action – making payroll entries in GnuCash

What just happened?

Net pay

Liability accounts

Calculation spreadsheet

Split transaction map

Payroll FAQ

Employee and expense voucher

Pop quiz – calculating payroll

Have a go hero – adding more deductions to payroll

Depreciation

Time for action – making depreciation entries for assets

What just happened?

Pop quiz – charging depreciation on capital assets

Have a go hero – applying a different depreciation method

Owner's drawing

Time for action – entering owner's draw in your books

What just happened?

Pop quiz – setting up a Drawing account

Have a go hero – setting up Drawing accounts for a partnership

Summary

8. Making Tax Times Less Stressful

GnuCash currently supports only US business types for income tax

Setting up income tax related accounts

Time for action – mapping GnuCash accounts to tax schedules

What just happened?

Pay your dues and demand services

Pop quiz – filing tax returns

Have a go hero – ensuring all business expenses are included in tax return

Creating income tax schedule report and TXF export

Time for action – getting the numbers for tax returns

What just happened?

Transferring data from GnuCash to Schedule C

Cost of goods sold

Car and truck expenses

Depreciation

Expenses for business use of home

Other expenses

Self employment tax

Other taxes

Manual entry or TXF import?

Pop quiz – exporting income tax data

Have a go hero – filling out Schedule C

Setting up sales tax tables

Time for action – setting up sales tax tables

What just happened?

Tax table

Tax on tax

Pop quiz – setting up tax tables

Have a go hero – charging compounded sales tax

Applying sales tax to invoices

Time for action – charging sales tax on sales

What just happened?

Pop quiz – applying tax tables to invoices

Have a go hero – showing individual taxes on the invoice

Summary

9. Printing Checks and Finding Transactions

Finding transactions

Time for action – searching for a transaction

What just happened?

Sorting transactions

Sorting transactions within a day

Filtering transactions

Viewing and sorting all transactions

Find transactions FAQ

Find customers, invoices, and so on

Pop quiz – filtering transactions

Have a go hero – searching for transactions

Printing checks

Time for action – printing checks

What just happened?

Printing one check at a time on a 3 check sheet

Printing address

Printing multiple checks

Custom check format

Printing receipts

Pop quiz – printing date format in a check

Have a go hero – printing a voucher check

Numbered accounts

Time for action – assigning numbers to accounts

What just happened?

Why account numbers?

An example account numbering system

Rectify over-invoicing

Sales refunds

Purchase refunds

Check & Repair

Pop quiz – editing account codes

Have a go hero – sorting by account code

Financial calculator

Time for action – calculating mortgage payments

What just happened?

Pop quiz – calculating mortgage payment

Have a go hero – maximum borrowing limit

Summary

10. Adapting GnuCash for Non-profits and Personalizing

No separate non-profit version of GnuCash

Bookkeeping for non-profits

Time for action – using GnuCash features for non-profits

What just happened?

Donors and members

Keeping funds for projects separately

Time for action – allocating funds for projects

What just happened?

Getting overall Income Statement

Time for action – getting overall Income Statement

What just happened?

Receivables

Multiple sets of books

Non-profit accounting FAQ

Pop quiz – creating a separate account for an event or a project

Have a go hero – creating a set of accounts and a budget for an event

Personalizing GnuCash

Time for action – getting your work environment just right

What just happened?

GnuCash preferences

Other preference settings

Set a color to each account tab

Resize columns in the account register

Leaving windows open

Summary Bar and Status Bar

Pop quiz – setting your preferences

Have a go hero – setting more of your preferences

Protecting your data

Time for action – backing up your data

What just happened?

Backing up

Making use of auto save

Retaining backup files

Restoring from a backup file

Password protection

Pop quiz – creating a backup

Have a go hero – restoring from a backup file

Summary

11. Data Import/Export: Use your Phone to enter Expenses

Saving expense data in your smartphone and uploading to your PC

Time for action – using a smartphone to save expense data

What just happened?

Pop quiz – separating transactions by type of payment

Have a go hero – archiving the images of receipts

Sending data through an expense tracking service

Time for action – using an expense tracking service to get data into GnuCash

What just happened?

Selecting an expense tracking service

Pop quiz – importing a CSV file

Have a go hero – adding notes to transactions

Migrating to GnuCash from other accounting software

Time for action – migrating to GnuCash from other software

What just happened?

Migrating data is not easy

First consider a fresh start on GnuCash

Business case for migration

Migrating from Excel2 and OpenOffice.org4 Calc

Migrating from Office Accounting2 (formerly Office SBA2)

Migrating from Quicken Home & Business1

Your version of Quicken allows you to export to a QIF file

Your version of Quicken does not allow you to export to a QIF file

Migrating from QuickBooks1

Exporting FAQ

Importing FAQ

Pop quiz – format suitable for creating accounts

Have a go hero – migrating from Excel to GnuCash

Exporting data from GnuCash

Time for action – exporting data from GnuCash for migration and other purposes

What just happened?

Migrating from GnuCash to other accounting software

Pop quiz – creating a Transaction Report with all of the transactions

Have a go hero – converting a GnuCash fileto a QIF file

Summary

12. Application Integration and Other Advanced Topics

These tutorials assume a certain level of proficiency

Using OpenOffice.org Base to query data

Time for action – using popular office software to query GnuCash data

What just happened?

Which databases?

Pop quiz – GnuCash default data format

Have a go hero – formatting the GnuCash raw data

Using MS Excel to create reports and charts

Time for action – connecting from Excel to create reports and charts

What just happened?

Other query and reporting tools

Pop quiz – understanding GnuCash fields

Have a go hero – changing the report frequency

Application integration

Time for action – exporting contact information from GnuCash

What just happened?

Export any data

Pop quiz – contact info stored in GnuCash

Have a go hero – extracting other data from GnuCash

Foreign currency transactions

Time for action – invoicing and receiving payment in Canadian dollars

What just happened?

Credit card charged in foreign currency during overseas travel

Foreign currency transactions FAQ

Pop quiz – entering the exchange rate

Have a go hero – exchange rate, currency loss, and the bank fee

Other handy tips and tricks

Customer jobs and vendor jobs

Time for action – grouping invoices for each contract separately

What just happened?

Vendor jobs

Special actions

Voiding a transaction

Adding a reversing transaction

Year end closing

Inventory management

Mileage tracking

Pop quiz – finding all jobs

Have a go hero – setting up vendor jobs

Summary

A. Pop Quiz Answers

Answers to Pop quiz

Chapter 1: Getting Started with GnuCash

Pop quiz – understanding accounts

Pop quiz – understanding account types and hierarchies

Chapter 2: Transactions – the Lifeblood of a Business

Pop quiz – understanding transactions

Pop quiz – navigating GnuCash

Pop quiz – understanding transactions

Pop quiz – using shortcuts to speed up bookkeeping

Pop quiz – viewing the account register

Chapter 3: Fun and eye-opening part - Reports and charts

Pop quiz – viewing standard reports

Pop quiz – customizing a report

Pop quiz – creating stylesheets

Pop quiz – saving exported reports

Chapter 4: How not to get lost in the transactions jungle

Pop quiz – reconciling with a bank statement

Pop quiz – reconciling with an electronic statement

Pop quiz – changing the account to import into

Chapter 5: Repetitive work? Let GnuCash do it

Pop quiz – creating a recurring transaction

Pop quiz – triggering scheduled transactions

Pop quiz – using the Scheduled Transaction Editor

Chapter 6: Business Mantra: Buy Now, Pay Later

Pop quiz – adding customers and creating invoices

Pop quiz – choosing an account

Pop quiz – keeping track of credit purchases

Chapter 7: Budget: Trip Planner for your Business

Pop quiz – creating a new budget

Pop quiz – calculating payroll

Pop quiz – charging depreciation on capital assets

Pop quiz – setting up a Drawing account

Chapter 8: Making Tax Times Less Stressful

Pop quiz – filing tax returns

Pop quiz – exporting income tax data

Pop quiz – setting up tax tables

Pop quiz – applying tax tables to invoices

Chapter 9: Printing Checks and Finding Transactions

Pop quiz – filtering transactions

Pop quiz – printing date format in a check

Pop quiz – editing account codes

Pop quiz – calculating mortgage payment

Chapter 10: Adapting GnuCash for Non-profits and Personalizing

Pop quiz – creating a separate account for an event or a project

Pop quiz – setting your preferences

Pop quiz – creating a backup

Chapter 11: Data Import/Export: Use your Phone to Enter Expenses

Pop quiz – separating transactions by type of payment

Pop quiz – importing a CSV file

Pop quiz – format suitable for creating accounts

Pop quiz – creating a Transaction Report with all of the transactions

Chapter 12: Application Integration and Other Advanced Topics

Pop quiz – GnuCash default data format

Pop quiz – understanding GnuCash fields

Pop quiz – contact info stored in GnuCash

Pop quiz – entering exchange rate

Pop quiz – finding all jobs

Index

Gnucash 2.4 Small Business Accounting

Beginner's Guide

Gnucash 2.4 Small Business Accounting

Beginner's Guide

Copyright © 2011 Packt Publishing

All rights reserved. No part of this book may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, without the prior written permission of the publisher, except in the case of brief quotations embedded in critical articles or reviews.

Every effort has been made in the preparation of this book to ensure the accuracy of the information presented. However, the information contained in this book is sold without warranty, either express or implied. Neither the author, nor Packt Publishing, and its dealers and distributors will be held liable for any damages caused or alleged to be caused directly or indirectly by this book.

Packt Publishing has endeavored to provide trademark information about all of the companies and products mentioned in this book by the appropriate use of capitals. However, Packt Publishing cannot guarantee the accuracy of this information.

First published: February 2011

Production Reference: 1040211

Published by Packt Publishing Ltd.

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Birmingham, B27 6PA, UK.

ISBN 978-1-849513-86-9

www.packtpub.com

Cover Image by Faiz Fattohi (<faizfattohi@gmail.com>)

Credits

Author

Ashok Ramachandran

Reviewers

Fabrice Estiévenart

Christian Stimming

Acquisition Editor

Usha Iyer

Development Editor

Susmita Panda

Technical Editor

Gauri Iyer

Indexers

Tejal Daruwale

Hemangini Bari

Editorial Team Leader

Mithun Sehgal

Project Team Leader

Priya Mukherji

Project Coordinator

Jovita Pinto

Proofreader

Kevin McGowan

Graphics

Nilesh R Mohite

Production Coordinator

Adline Swetha Jesuthas

Cover Work

Adline Swetha Jesuthas

About the Author

Ashok Ramachandran is a graduate in Mechanical Engineering and has a Masters in Business Management from the Indian Institute of Technology (IIT) Madras. He started with an engineering career, including the running of two small businesses, and then made a mid-career switch to Information Technology (IT). Currently, he is a senior IT executive in the Washington DC area. His penchant for explaining technology to non-technical users and interest in writing culminated in this book. For other open source software suitable for small medium businesses, you can refer to his website http://smb-soft.com.

I would like to thank the open source GnuCash team - the developers, the documenters, the people who keep the gnucash.org website and related infrastructure up and running and, especially, the people who answer user questions tirelessly on the mailing list. I would also like to thank my technical reviewers, Christian Stimming and Fabrice Estiévenart, for helping to catch my mistakes and providing valuable suggestions for improving my text. I would also like to thank the Packt team, especially my Acquisition Editor Usha Iyer for providing early feedback and channelling my ideas on the right track as well as my Project Coordinator Jovita Pinto, Development Editor Susmita Panda, and the Technical Editor Gauri Iyer for all their painstaking work in getting this book to print.

About the Reviewers

Fabrice Estiévenart is addicted to web and open-source technologies with a specific focus on web frameworks (Symfony, Pylons, Ruby on Rails), search engines (Lucene, Sphinx, Nutch, Solr), and database modelisation/abstraction (Doctrine, SQLAlchemy, Active Record). His favorite programming languages are PHP, Python, and Ruby.

He has initiated or contributed to several open-source projects such as SimPic (a lightweight PHP photo gallery), DocAlchemy (a 'Doctrine to SQLAlchemy' converter), DocRails (a 'Doctrine to Active Record' converter), CatCash (a rule-based transaction classifier in GnuCash) and Retroweb (a visual web-wrapping application).

Besides these initiatives, he is the developer and webmaster of several different web sites ranging from musical news portals (http://www.guitareacoustique.com) to personal blogs (http://www.destinationlibre.org, http://www.fabrisss.com).

Christian Stimming lives in Hamburg, Germany, working with SICK AG on research and C++ software development of real-time signal processing for industrial and automotive sensor applications. He learnt the benefits of Open Source software during his studies in Electrical Engineering at Hamburg University in the 1990s, started to contribute to the GnuCash project in 2000, and has been working with the GnuCash developer team since that time. Recently, he started a consulting business for users of GnuCash, successfully offering customization and training for small and home-office business customers in Germany. While reviewing this remarkably helpful book, his third child was born and Christian is happy to report all is well with his family and the new-born daughter in Hamburg.

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Preface

Attention, small business owners! Stop tax-day stress. Stop procrastinating with a shoebox full of receipts. Stop reinventing the wheel with a spreadsheet. Stop making decisions simply on a hunch. Stop wasting money on software that is overkill. Start by downloading GnuCash and getting your accounts in order. Designed to be easy to use, yet powerful and flexible, GnuCash allows you to track bank accounts, income, and expenses. As quick and intuitive to use as a checkbook register, it is based on professional accounting principles to ensure balanced books and accurate reports. You can do it and Gnucash 2.4 Small Business Accounting Beginner's Guide will help you get up and running with maintaining your accounts.

Gnucash 2.4 Small Business Accounting Beginner's Guide speaks business language, not accountant-speak, because it is written by a former small business owner. It helps you to use GnuCash from scratch with step-by-step tutorials without jargon, pointing out the gotchas to avoid with lots of tips. It will teach you to work on routine business transactions while migrating transaction data from other applications gradually. It will teach you to work on routine business transactions as well as migrate transaction data from other applications.

Beyond Chapter 3, it is up to you how far you want to go. Reconcile with your bank and credit card statements. Charge and pay sales tax. Do invoicing. Track payments due. Set up reminders for bills. Avoid stress at tax time. Print checks. Capture expenses using your mobile phone.

Gnucash 2.4 Small Business Accounting Beginner's Guide gives you the power. Know your numbers. Make decisions with confidence. Drive your business to its full potential.

Get your accounts in order and avoid tax-day stress with this hands-on guide to GnuCash, the best free accounts software in the world.

What this book covers

Chapter 1, Getting Started with GnuCash: Before you can start using GnuCash you have to install it. Therefore, the first chapter starts with the detailed steps to install GnuCash on a Windows PC. Then, using the built-in template in GnuCash, you will practice creating the set of accounts (also known as categories) needed for a small business. You will also see how to enter opening balances. You will