Let us see an example of how to assign account numbers using the Renumber Subaccounts feature of GnuCash.
- Make sure the Account Tree window is on top. Select one of the parent accounts, say, Expenses. From the menu select Edit | Renumber Subaccounts. Enter 4 in the Prefix field and select an Interval of 5 as shown in the following screenshot:
- Click Renumber. You will find that GnuCash has renumbered all the subaccounts of this parent account.
- Next you can select, say, Auto and renumber all its subaccounts.
- However, you will find that the top-level account, namely Expense has not been numbered. You have to number this manually. Click on the Account Code field on the Expense line. The field will become a textbox allowing you to edit it. Enter the number 4 as shown in the following screenshot:
- Now you can tab out of that field and make sure to save your changes.
Who said that numbered accounts are for dictators and spies? You can have them too. No, these are not for stashing away your ill-gotten or clandestine money from prying eyes. We are talking about assigning numbers to your GnuCash accounts.
You may want to have account numbers for the following reasons:
- You find it convenient to organize a large group of things by number rather than by name.
- You attended an accounting course and numbers were recommended.
- You have been using a chart of accounts with account numbers for some time and you find it easier to follow the same system.
- You want to arrange your accounts in a different order and giving them a number and sorting by the numbers is the way to do that.
- You have an unduly large number of accounts and you find it difficult to handle them by names alone.
In addition to using the account numbers to sort in the Account Tree itself, you also have the option of selecting it as a sort field in several reports.
Some people have found it convenient to follow a four-digit account numbering system as follows:
- 1000: Asset Accounts. What you own.
- 2000: Liability Accounts. What you owe.
- 3000: Income Accounts. Sales.
- 4000: Direct Expense Accounts. Typically, what you will report under Cost of Goods Sold.
- 5000: Indirect Expense Accounts. Other overhead expenses.
- 5100: Repairs
- 5200: Professional Fees
- And so on.
- 7000 - 8000 Non-Operating Accounts (Equity, interest income, and so on).
Then the individual accounts will have numbers such as 5205: Legal Fees, 5210: Accounting Fees, and so on. However, please note this system requires you to enter the numbers by hand. You won't be able to use the Renumber Subaccounts feature to automate it.
Let us say that you created and posted an invoice. Later you discovered that you over-invoiced due to an error. Accountants deal with this by issuing what they call a credit note. You can think of a credit note as the opposite of an invoice. GnuCash doesn't have a way to issue a credit note.
However, you can go back to the original invoice, unpost it, and modify it as follows. Add a new line to the invoice to show the correction amount on the side opposite to that of the sales. Now post the invoice again. This method has the following advantages:
- The amount was directly amended in the original invoice. This will make sure all the reports are correct.
- If you adjusted the original invoice amount, you would get the same result. However, you will not have any record that the invoice was created and sent and later adjusted with a credit note.
Your customer bought a product from you and paid for it. Subsequently they came back to you and said that they were not happy with all or some part of the product. You have offered to rectify or replace what they are not happy with. However, they are insisting on a refund. Customer satisfaction is a key motto of your business and you have decided to refund the money.
Sales refund is the reverse of a sale. When you made a sale, you increased Sales and increased the Checking Account bank balance. Now you have to make an entry that decreases both. Also, for easy reference, you may want to add a note to the original invoice that a refund was made. Remember, you will have to Unpost it, add the note and Post it back again.
What happens if you return an item back to the store after you bought it and entered the transaction in the books? You later found that it was not the right item or you were not happy with the quality. Of course, if you got a full cash refund, the easiest way of fixing it would be to delete the original transaction, as if you never bought it in the first place. This approach will work in the case of credit card transactions where the store reverses the transaction fully. However, it is possible you have already accounted for the transaction in the previous month or quarter and you don't want to reopen those transactions and reports.
In the case of a purchase refund, you should make a transaction that is the opposite of a purchase transaction. When you buy an item for cash, you will reduce Cash balance and increase Office Supplies expenses. Now that you have returned the item and got a cash refund, you can make an entry increasing Cash balance and decreasing Office Supplies expenses.
As we described in detail in the section on transactions, all GnuCash transactions have matching splits. For example, if you create an entry for an expense, there will be a matching reduction in cash or bank balance or an increase in the amount you owe in a credit card, depending on how you paid for that expense. If you delete an expense, the matching payment entry will also get deleted. Thus, GnuCash tries to keep transactions balanced at all times with matching splits. However, sometimes these entries can go out of balance. How come? The following are some of the ways this can happen:
- You migrated from another accounting software to GnuCash and you imported all the transactions into GnuCash. Due to errors in importing, one split got imported successfully, while the other didn't.
- You imported transactions from your bank or credit card accounts into GnuCash. Due to errors in importing, one split got imported successfully, while the other didn't.
After doing any of the preceding, or if you notice that one split of a transaction seems to be missing, you can get GnuCash to repair it. How? From the menu select Actions | Check & Repair. If you do this from the Accounts Tree window, you will get options to Check & Repair an Account, Subaccounts, or All. If you are in an account register, you will get options to Check & Repair a Transaction or All Transactions. Choose whichever you are trying to repair. However, please note that this feature was built for earlier versions. Currently you may not find the need to use this feature that often.
- Which one of the following is not a valid window for editing account codes?
a. Edit Account dialog
b. New Account dialog
c. Account Tree window
d. Open Subaccounts window