diff --git a/doc/sgml/C/xacc-incomeexpense.sgml b/doc/sgml/C/xacc-incomeexpense.sgml index dc66fcc5b4..fdb418468b 100644 --- a/doc/sgml/C/xacc-incomeexpense.sgml +++ b/doc/sgml/C/xacc-incomeexpense.sgml @@ -7,37 +7,25 @@ What are Incomes and Expenses? The words "Income" and "Expense" are beguilingly simple; - everyone thinks they know what they mean; this usually is that When I spend something, this is an - expense, and when I get money, this is an income. - - -This oversimplifies things somewhat; it is often a good-enough approximation when doing personal accounting, - but when running a business, incomes and expenses often have be - recognized as having occurred when some "critical event" takes - place that may not perfectly correspond to "when cash comes in - or goes out." - - -For instance, companies usually have to recognize income - when the sale occurs. That may mean that I have to - recognize a $100,000 sale at the moment I and the customer - shake hands on the deal. + everyone thinks they know what they mean. + The money I get is income, the money I spend is + expense, right? Right! However, there are subtlties. + The time that you make your income is ofen different than + when you actually get the money: to ease the recording of these +types of transactions, the concept of 'accounts payable' and 'accounts +receivable' has been invented. Click on that link to go there. +This ection deals with the more basic recording of incomes and expenses. + - -Since the money hasn't come in, the sale has to be estimated - in other way; the way this is done is to accrue a sale - at that time, and in making the transaction balance, rather - than adding something in to cash, I'd add the $100,000 sale to - Accounts Receivable. + + Recording Income and Expenses + - In a double entry system, two kinds of accounts must be created: some of type "Income" and others of type "Expense." (There tend to be a lot more different kinds of expenses than there are of incomes.) - - -Income such as salary, wages, bank interest and stock + Income such as salary, wages, bank interest and stock dividends are then recorded as transfers from an income account to a bank (or, in general, some asset) account. Similarly, expenses are recorded as transfers from a credit card account @@ -178,6 +166,41 @@ this to be a pretty odd situation.) +The words "Income" and "Expense" are beguilingly simple; + everyone thinks they know what they mean. + The money I get is income, the money I spend is + expense, right? Yes, but only in a very basic + sense. This may be enough when doing personal accounting, but + for a business, things get more complicated. + Income and expenses may be recognized as having occurred at a + moment that is different from the moment when cash actually moved + into or out of the business's bank accounts. + + +For instance, companies usually recognize income + when the sale occurs. For example, + that might mean that you recognize a $10,000 sale + at the moment you and the customer + shake hands on the deal. + Since the money hasn't actually come in, the sale has to be posted + in another way. You must accrue a sale + at the time of the handshake. To make the transaction balance, + you add the $10,000 sale to Accounts + Receivable, + rather than adding something in to cash. + + + Insider Knowledge: When a sale is recognized + and how its recorded is governed not only by accepted accounting + principles, but also by local and national laws. In the United + States, accepted accounting practices are determined by FASB, + the Federal Accounting Standards Board. + + +(The documentiation should state that +for more info, click to the a/r/ and a/p page). + + Using Income/Expense Accounts