Joe
(joe1011010)

    joe1011010_km@users.sourceforge.net

2006-05-30
0.8

# Making the most of &kappname;

You could go ahead, click some buttons and fill in some data. After a time, you could decide you have done it wrong and start again, even if you did read the documentation on each part of &kappname;.

You will get a more effective system if you spend a little time planning how you are going to use &kappname;, so follow the steps given here.

## Basic Accounting

Imagine your money as balls, or beans, and to stop them rolling around you keep them in a box, or pot. Accounting, or Book Keeping, is the process of counting the beans in the pot, or several pots.

You have some money, in the pot marked Cash. You buy some goods, so you take some beans out of the cash pot and place them into another pot marked Supplier. The supplier gives you some goods in exchange for the cash, so you take the beans out of the pot marked Supplier and put them in the pot marked Goods.

The goods have a value (the price you paid) so you still have the same amount of beans, some representing cash and some representing goods.

In this case you have two movements of beans, or transactions. Each transaction needs two entries, one to take beans out and one to put beans in. This is called double entry book keeping or double entry accounting. The recording of the transactions is done in a Ledger; each pot is known as an Account or Ledger code.

Now you take some goods and give them to a customer, who gives you some cash in exchange. The goods were worth some beans and, hopefully, the customer has given us more beans than that, so making a profit. To over simplify, the beans from the Goods pot come back as Cash, but we can split that as the Cost of Goods sold and Profit. This transaction has three entries; one side of the double entry has been split.

This will be covered properly in setting up accounts for Businesses.

### Defining the accounts (personal records)

Most accounts, or pots, above represent a measure of our Worth. The cash and goods represent our Assets; so does what we are owed if our customers have not yet given us the money. The money we owe, say if we had not paid our suppliers, are our Liabilities. These accounts are transferable to Cash and have a value.

Any pots that cannot be valued are Income or Expense, such as an unpaid phone bill that would be an expense as we have already made the calls. Although these do not have a value, it is useful to monitor how much is in each.

In some cases a supplier is a Liability, in others it is an Expense. This is something we need to consider and decide for each case. Similarly, you may set up a loan as a Liability, particularly if you transfer the money into your bank account, but it could be an expense if it was to buy some furniture.

Consider how you want to analyze your income and expenses. This will decide how you set them up.

Finally, consider if you want everything in one set of accounts, or two or more. This may depend on the legal framework or just how you want to analyze things. Each set of accounts would be handled separately.

### Defining the accounts (business records)

This is similar to setting up for personal use, but needs to follow legal guidelines. You should be aware of what these are.

## Mapping your finances to &kappname;

So, collect up your papers and see the following sections for each item in &kappname;.

### Accounts

These hold a value. Transactions are created against one or more accounts.

#### Accounts - Asset

These are the accounts which hold your money and possessions that you wish to monitor. The following types are available:

Checking

  Standard bank trading account.

Savings

  Standard bank savings account.

Cash

  Money in your hand or wallet.

Loan

  Loans made by you, etc.

Investment

  Investments made.

Asset

  Property, collections, etc.

#### Accounts - Liability

These are the accounts which represent your debts and money owed that you wish to monitor. The following types are available:

Credit card

  Standard credit card account.

Loan

  Loans made to you, mortgages, etc.

Liability

  Anything you owe that is not a loan.

### Institutions

These are completely optional and can be used to group accounts, and show a total value for all accounts in each group.

### Categories

These represent non-managed income and expense accounts that do not have a value. The total value of transactions is shown against each category. A category or transfer account is required for each transaction.

### Sub-Categories

Categories can be split into sub-categories, but the sub-category totals are not included in the higher level category total.

### Payees

These are optional for transactions. They are required for Scheduled transactions. A transaction history, with category, is shown against each payee.

### Scheduled transactions

Where regular transactions occur, these can be set up against a Schedule. Transactions are created from a schedule; any that are overdue can be seen on the home page.