I and one of my colleagues at Sanmark Solutions started a little side business couple of weeks ago. We immediately ran into the problem of managing and keeping track of money we put into that business and we spent for various things. Neither of us knew anything about accounting. So we clearly needed the help of a software, that would make it easier to handle it all for us.
I am using CashBase to manage my personal finances for quite some time now, and I considered using it for the task. But it doesn’t work well for managing several accounts where several people have their money in them.
Googling about managing accounts brought me the concept of “T-Accounts”, which simply means (As I understood. Please note that I know nothing about accounting!) in each “account”, you have two columns to enter “credits” and “debits” and at the end of the account, you calculate the balance. There are lot more to this, if you know, please do share it in the comments field below!
GnuCash is a software which supports this “T-Accounts” standard, which is free and open source. You can install it on Linux, Windows, and MacOS. Most of all, it removes the complexity of accounting by not using “Credit – Debit” for accounts’ columns, as they can be misunderstanding. Instead, GnuCash uses “Receive – Spend”, “Decrease – Increase”, and “Expense – Rebate”. In other words, GnuCash makes accounting a doable thing for people like you and me (That is, of courser, if you’re not an accountant! In which case, you have to correct my errors in the comments field. 😉 ). Anyway, the standard is to have the Credits column in the left hand side while Debits is in the left, so you can deduce that “Receive” is “Credit” and “Spend”is “Debit” and so on.
This “T-Accounts” method is officially called “Double-entry bookkeeping system”, which means that a record about a single transaction actually recorded in two accounts, the one from which money came and the one to which money goes to. For an example, if you take cash out from your wallet and buy a cup of coffee with that money, your “Wallet Account” gets a “Spend” and your “Food and Beverages Account” gets a “Expense”. (Please note that “Spend” is a debit and “Expense” is a credit. When entering a transaction to it’s two matching accounts, one should be a credit and other should be debit. They can’t be same in the two accounts.) Anyway, we don’t have to worry about these things when we use GnuCash, as it automatically adds a record to the matching account, when you add it to one account.
I really felt GnuCash easy to use, and even educating! You learn a thing or two about accounting while you’re at it.
Do you use GnuCash or some other software like it? Share your story with us.