Gnucash questions (for personal finance)

[jnw]

So I am using Gnucash now for personal finance.  (I used to use it before for bookkeeping for my ebay reselling business and it was great.)

I have a question for you guys, since personal finance is a little different than the accounts you'd use in business.

Under Equity, I currently only have one account in there "Opening Balances" which make sense for checking and savings accounts along with liability accounts.   I even use "Opening Balances" equity account for my fixed/discretionary asset accounts, with an initial large split transaction which lists off all the assets along with the current estimated worth.

My question is which Equity account did you create and now use for continually adding, over time, more and more worthwhile assets you find around the house?  For my business when I added an asset, I used the "Owner Contribution" equity account, but this isn't a business.

Right now I am continually updating the initial "Opening Balances" equity account with the huge split transaction of assets.   But perhaps it might be good to be able to track equity added each month for discovered/existing assets.  Should I call it "Equity:Existing Assets" or "Equity:Discovered Assets" ?  Which account do you use for this purpose?

[s0198362]

Equity = Assets - Liabilities

I'm a bit confused as to what assets you're discovering?  Do you just have $100 bills stuffed down the sofa?  Or are you actually putting a monetary value on your sofa?  I don't know if the latter is really a good idea.  Perhaps questions to ask yourself:

Why do you need to track the value of assets you find around the house?
Can you actually sell them?
Will you depreciate (or perhaps even appreciate if they are somehow gaining value over time) their value appropriately if you really do want to track their value?

Happy to learn from your response and any other replies, but that is my 2 cents worth.

[jnw]

Equity = Assets - Liabilities

I'm a bit confused as to what assets you're discovering?  Do you just have $100 bills stuffed down the sofa?  Or are you actually putting a monetary value on your sofa?  I don't know if the latter is really a good idea.  Perhaps questions to ask yourself:

Why do you need to track the value of assets you find around the house?
Can you actually sell them?
Will you depreciate (or perhaps even appreciate if they are somehow gaining value over time) their value appropriately if you really do want to track their value?

Happy to learn from your response and any other replies, but that is my 2 cents worth.

These are for assets which I can easily sell yes and I don't bother entering in small items.  I have a lot of them laying around the house and in the shed, and will eventually have to enter them into gnushcash over time; I entered in all the ones which immediately came to mind when I setup gnucash a week ago for personal finance.

You have to debit an asset account and credit an equity account.  The only account I had setup in gnucash for equity was "Opening Balances".  It seemed odd to use that Equity account every time I add another asset into my fixed assets and discretionary assets accounts.

I've added the following equity account and am using it now:

Equity:Existing:Personal Property

Yes I know the formula, I used gnucash for my books very well for my ebay business.

Yes I depreciate and appreciate their value.  I make initial entries into these asset accounts, with their current depreciated value; this gives me an accurate net worth.

Any significant item I buy from now on, I credit the account I bought it with and debit the asset account with the instant depreciated value, expensing the depreciated amount immediately using the appropriate depreciation expense category I set up.  By tracking the appreciation/depreciation this also gives me accurate expense accounting, to see how much a particular hobby is costing me for example.  If I buy a small item which I know I will never bother end up selling, I just fully expense that item immediately 100%, and do not enter into an asset account.  For example, for my Electronic Music hobby, I entered in my "MPC One" into Discretionary Assets account for $600 (what I could easily get for it now) and credited Equity:Existing:Personal Property.  But say I bought an audio cable for it, I wouldn't enter that cable into an asset account, I'd expense it 100% into Expenses:Discretionary:Hobbies:Electronic Music:Accessories.  (Depreciation for my Electronic Music hobby gets expensed to:  Expenses:Discretionary:Hobbies:Electronic Music:Depreciation.)

Another example of an asset I wouldn't bother entering into my Fixed Assets accounts is say a sofa I buy for $75 from facebook marketplace.. since I never plan on selling it and I plan on using it until it wears out, I just expense it fully the time I acquire it. But I do put the used iPhones I buy into my Fixed Assets account because it's an item I can easily (and will) resell, but is not a Discretionary Asset.  Like if I bought a used iPhone for $200, I'd immediately instantly depreciate it to $125, because that is how much I anticipate getting for it 2 years down the road when it comes time to upgrade to another.. I immediately expense the other $75 at the time of getting it to Expenses:Phone:Depreciation. If later say I end up selling it for $150 instead of $125, I will credit the Expenses:Phone:Depreciation account by $25.  If instead, later the phone sells for only $85, I would further debit the Expenses:Phone:Depreciation by $40 at the time of sale.  Or for example, I lose the phone or it gets destroyed, I'd then debit the full $125 to the Expenses:Phone:Depreciation account. This gives me accurate accounting of my actual phone related expenses to the penny.

It's worth tracking the large assets, especially all the ones I recently put in the Discretionary Assets account which amounts to over $7700 so far.  All these items I could sell within a month or two and are items I don't really need but have around for hobbies etc.  I treat these an extension of my emergency fund.

[jnw]

Another example:

Say you forgot about that $10,000 Fender Telecaster you just discovered under your bed, wouldn't it make sense to add that to perhaps "Discretionary Assets" and have it part of your Net Worth in gnucash? You'd perhaps debit "Discretionary Assets" by $10k and you'd have to credit some sort of Equity account at the same time.  So I've settled on Equity:Existing:Personal Property for now.

[RWD]

There's definitely some personal preference in how you handle this sort of stuff. I don't track small value items (anything less than our cars) but if I did I would have used Opening Balances for everything. It's just a placeholder for stuff that existed before you started tracking. Then if you "find" something that you already had and wanted tracked you would also put it under Opening Balances but put in the date the same as all your other opening balances so that it doesn't look like it poofed into existence. Your Equity:Existing:Personal Property works fine too, it's just more detail than I think is necessary for the initial set up (since which asset category it maps to already tells you what kind of equity it was). And again, anything you add to that category from here on should be dated in the past since you already had it.

Any new personal property that you purchase will not come through Equity but instead be a transfer from Assets or Liabilities (or even Income, if it is gifted to you). For example:
TV purchase -- Liabilities:Credit Card <-> Assets:Fixed Assets:Personal Property
Pay off credit card -- Assets:Current Assets:Checking <-> Liabilities:Credit Card

Personally I think trying to depreciate small value items is too much hassle. So I did not add any personal property I already owned to GnuCash. For new purchases I put the full amount in the appropriate Expenses category. Then, if I sell something, I treat the net sale proceeds as a negative expense from the appropriate Expenses category. Since the values are low enough this isn't really disruptive to net worth tracking and you could think of it as treating personal property sales as trade-in credit towards the next purchase in the same category.

[jnw]

There's definitely some personal preference in how you handle this sort of stuff. I don't track small value items (anything less than our cars) but if I did I would have used Opening Balances for everything. It's just a placeholder for stuff that existed before you started tracking. Then if you "find" something that you already had and wanted tracked you would also put it under Opening Balances but put in the date the same as all your other opening balances so that it doesn't look like it poofed into existence. Your Equity:Existing:Personal Property works fine too, it's just more detail than I think is necessary for the initial set up (since which asset category it maps to already tells you what kind of equity it was). And again, anything you add to that category from here on should be dated in the past since you already had it.

Yeah this is what I was doing. I kept adding them into my initial Opening Balances, split transaction.

Any new personal property that you purchase will not come through Equity but instead be a transfer from Assets or Liabilities (or even Income, if it is gifted to you). For example:
TV purchase -- Liabilities:Credit Card <-> Assets:Fixed Assets:Personal Property
Pay off credit card -- Assets:Current Assets:Checking <-> Liabilities:Credit Card

Yes I realize this and even mentioned it in my above post, how I handle transaction of newly acquired assets; which I've also already done a few times for items purchased this month.

Personally I think trying to depreciate small value items is too much hassle. So I did not add any personal property I already owned to GnuCash. For new purchases I put the full amount in the appropriate Expenses category. Then, if I sell something, I treat the net sale proceeds as a negative expense from the appropriate Expenses category. Since the values are low enough this isn't really disruptive to net worth tracking and you could think of it as treating personal property sales as trade-in credit towards the next purchase in the same category.

This $7700 in "Discretionary Assets" is a large chunk of money for me; maybe it's pocket change to you I realize that.  But for me it reminds me exactly how much I have if things go south.  It's a backup to the cash emergency fund in the bank.   All these items are hobby items which I don't really need -- and I'm already going to sell a few of these items this coming month.  Doing the appreciation / depreciation of these large dollar discretionary items is really no work for me and it gives me a more up to date accounting of what my expenses are in various categories.

It also helps me psychologically by accurately tracking my hobby expenses each month.  Say I bought $1100 in used Electronic Music gear one month.  One might say, wow you spend a lot of money for your hobby this month.  But you could of gotten those used items even below what you could later resell them for.  So it turns out you really aren't even spending anything for the hobby.  By putting it in an Assets account and instantly depreciating anything you paid over current depreciated value, this gives you your actual up-to-date expense for the hobby.

I am trying to keep my Discretionary expenses (which includes hobbies) $100 or less each month, preferably $50 per month.  Why should I deny myself a hobby item I want, if I can get below current fair value? By doing so it doesn't increase my Discretionary spending by a penny for that month.  It's just a shifting of cash assets to physical assets, which can later be shifted back from physical to cash.

[RWD]

Yes, like I said it's personal preference. I don't think how you're doing it is wrong, if anything it's more accurate. You just have to decide where you draw the line on what's worth tracking.

For your original question about the Opening Balances account I think you're just overthinking it. After initial set up you shouldn't really need to ever touch it again (unless you forgot to put something in). I've been using GnuCash for over a decade continuously now and have almost forgotten that it even exists. It's just a way to account for the fact that you didn't start at $0. In theory if you back-filled all the transactions since you were born you would put nothing under the Equity category at all.

[jnw]

I appreciate your replies RWD!   Thank you.

I am also using my Discretionary Assets account lately as sort of a running list of stuff I need to sell, which I am finding around the house.  If I haven't touched the item in years, and no longer really need it, and I know I can easily get at least say $20 out of it from Facebook Marketplace, I am entering it in; it makes me feel better to see that my emergency fund is increasing every time I find these items.  I've been going around the house looking lately since I setup gnucash :)  (I'm going to sell a Weber 26" grill I got for $55 a couple years back for $250 here soon on FB marketplace.  It goes for $399 plus tax new right now and this one is in very good condition -- BBQ is another hobby of mine.)