3.1. Using Accounts vs. Categories
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## 3.1. Using Accounts vs. Categories

“Where does it all go?” is a common question when discussing personal finances. One of the most useful features Gnucash offers is the ability to track what you earn (income) versus what you spend (expenses). If you are new to personal finance software, you will enjoy the increased visibility into your spending habits. At tax time, the records you keep in Gnucash will prove invaluable. And by keeping track of what you earn and where you spend, Gnucash can produce several useful reports that answer the age-old question, “Where does it all go?”

If you are familiar with other personal finance programs, you are already accustomed to tracking your income and expenses as categories. Since Gnucash is a double-entry system (refer to section 2.1), incomes and expenses are tracked in accounts. The basic concept is the same, but the account structure allows more consistency with accepted business practices. So, if you are a business user as well as a home user, Gnucash makes it easy to keep track of your business as well as your personal accounts.

Income and expense accounts give you the same information you would get with categories, but they also give you more flexibility in entering your transactions. In GnuCash, you have the option to enter transactions directly into income and expense accounts through their account registers. Other programs that use categories do not offer this option, because there is no “account register” for a category.

You also have the option in GnuCash to treat income and expense accounts exactly as you would treat categories, if you are more comfortable with that method. In QuickenŽ and similar programs, transactions require an account and a category. Substitute an income or expense account name in GnuCash where you would normally enter a category name in the other programs, and the result should be the same. We will discuss transaction entry in Chapter 4 in greater detail.

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