GNUCash: How to count up equity?
I would say when starting with Gnucash to start with the level of granularity you are comfortable with while sticking to the double entry bookkeeping practices. So going through each one: Refund for Parking Pass. Assuming you treat the Parking Pass as a sunk cost, i.e. an Expense account, its just a negative entry in the Expense account which turns into a positive one in your Bank account. Yes it may look weird, and if you don't like it you can always 'pay from Equity' the prior month, or your Bank Account if you're backfilling old statements. Selling physical items. If you sold it on eBay and the value is high enough you'll get tax forms indicating you've earned x. Even if its small or not done via eBay, treat it the same way and create a 'Personal Items/Goods' Income account to track all of it. So the money you get in your Bank account would have come from there. Found jacket money would be an Equity entry, either Opening Balances into Cash or Bank account. Remember you are treating Equity / Opening Balances as the state before you started recording every transaction so both the value going into Assets (Banks,Stock,Mutual Funds) and Liabilities (Mortgage, Student Debt, Credit Card Debt) originate from there. I would take each of these items and any others and consider how you would count it as an expense in the other direction. If you have an account for parking expenses or general transportation funds, credit that account for a refund on your parking. If you have an account for expenses on technology purchases, you would credit that account if you sell a piece of equipment as you replace it with an upgrade. If you lost money (perhaps in a jacket) how would you account for the cash that is lost? Whatever account would would subtract from put a credit for cash found.
Typically in GnuCash, account balances that exist at the beginning of the time you're keeping records for are balanced by entries in an Equity account “Equity:Opening Balances”, which is part of the default set of accounts created for you. This account is really just a placeholder so that everything balances, and that's perfectly normal. So, just enter “Equity:Opening Balances” as the “other entry” when entering the first, opening balance, transaction in your Liability account for the loan. If you have not already created the liability account, then just use the “Opening Balance” tab of the New Account window to enter the initial balance as you create the account.  (Disclaimer: I have no formal knowledge of accounting; I just use GnuCash and read the users' mailing list.) "No, I understood your question perfectly.  I'm just saying that sort of situation is generally rare.   A quick Google search yields [this article] (http://www.investopedia.com/financial-edge/1112/small-business-financing-debt-or-equity.aspx) which responds to the question - Which funding method should I choose? with the answer ""Often you will not have a choice"".    That is exactly what I'm saying.  The status and stage of your business dictates what sort of financing is even available to you.  Most often you don't even have a choice between one or the other.  If you want a formula, the other people responding mentioned [WACC] (http://www.investopedia.com/terms/w/wacc.asp) which is the ""standard"" that finance professionals typically use.  You generally will want a WACC that is similar to other successful companies of your similar size and industry.  The actual mechanics of adjusting your WACC will involve either issuing (or repurchasing) equity or debt.  Regardless, what you are asking is not generally practical nor does it come into practice in 99 out of 100 financing situations.  WACC is important to understand and consider but people don't issue equity or debt just to balance their WACC.     Think about this another way... how easy is it to raise debt?  Probably fairly easy as usually you can go to commercial banks or go to an investment bank if you're raising enough debt.  Companies borrow all of the time, they're constantly paying off loans or taking new ones with different interest rates.  There are revolving lines of credit, secured loans, factoring (borrowing against receivables), EETCs, fixed interest debt, variable interest debt, mezzanine debt, etc etc.  How easy is it to issue equity?  Pretty amazingly difficult... sure you have your IPOs but that happens once in a company's lifetime.  You might have [secondary offerings] (http://en.wikipedia.org/wiki/Secondary_market_offering) or [follow ons] (http://en.wikipedia.org/wiki/Follow-on_offering) but those are incredibly rare... I mean you've probably never even heard of them right?  You don't hear about Apple or Boeing doing those every quarter do you?  You'll hear about private equity companies buying up firms and you'll hear about mergers all of the time but again those are once-in-a-company's-lifetime events.    So now that you've read that.. how often is a company **really** going to be deciding between debt and equity?  Not very often." You need to be clear about who gets your money: If you pay the existing owner $25K and (s)he gives you half the business, then you now own half of a $50K business an the original owner has an extra $25K in spending cash.  The value of the business has not changed. If you contribute $25 to the company, new equity shares are created.  Shares should be priced correctly, meaning you now own $25K worth of shares in a company worth $75k, so you should have 1/3 of the outstanding shares (counting both old and new shares).  If you get more or less than this, then the transaction has happened in an unfair way. If this is a public company, that would most likely be illegal and the SEC may throw you in jail.  If it was a private company and your friend created enough shares that you own half the company, then (s)he has given you a gift. If you are contributing to the company at a fair price, you would need to contribute $50K in order to end up with half the equity of the new and now more valuable firm. In that case the firm would be worth $100K after your contribution. Bottom line, this is a common and not complex transaction and should end up with a completely fair outcome.  Any unfair situation you can imagine is probably based on false assumptions or a situation where a non-arms-length transaction is transferring wealth contrary to normal rules and procedures. Dividends and interest are counted under operations for the purpose of this tweet. This is pretty much entirely a non-story. I'm not sure exactly how they're dividing it up, but it looks like they're only counting stock appreciation as capital gains and counting things revenue from sales (from their subsidiaries as well) under operating income.   This is just from a quick glance over their statement of earning, but that's what it looks like to me. "You don't. No one uses vanilla double entry accounting software for ""Held-For-Trading Security"".  Your broker or trading software is responsible for providing month-end statement of changes.  You use ""Mark To Market"" valuation at the end of each month.  For example, if your cash position is -$5000 and stock position is +$10000, all you do is write-up/down the account value to $5000.  There should be no sub-accounts for your ""Investment"" account in GNUCash.  So at the end of the month, there would be the following entries:" "Excess Cash = Cash & Equivalents + Long-Term Investments - Current Liabilities The problem this calculation of excess cash is that ""long-term investments"" can be illiquid things like real estate. Another flaw is that it gives no credit for Current Assets, like receivables, which can be used to offset Current Liabilities. The first thing I'd do is ""net out"" Current Assets and Current Liabilities, then add Cash back in.  Excess Cash = Current Assets - Current Liabilities + Cash & Equivalents. It would be nice if GAAP would require Long-Term Investments to be broken out as a) liquid long-term investments (stocks, bonds) b) illiquid long-term investments (real estate, private equity, etc)" First, A credit account is increased by credit transactions and decreased by debits. Liabilities is a credit account and should be a positive number.  A debit account is increased by debit transactions and decreased by credit. Assets is a debit account and should be a positive number.  Equity = Assets (debit) - Liabilities (credit) may be positive or negative.  You currently are subtracting a negative number for a net positive, since your Liabilities is set as a debit account.  How you currently are set -> Equity = Assets (debit) - Liabilities (debit) It is easier to understand if you change the columns from Increase/Decrease to Credit/Debit. I believe this is changed through Edit > Preferences > Accounts > Labels > Use formal accounting labels.  To fix your situation, open up the Loan account and switch columns on the amounts. This will decrease Opening Balances and increase the loan, per your current column headings.  This is a snippet of Opening Balances. You see that Opening Balances is debited and the Loan/Liability account credited. I included Petty Cash to show the reverse. Petty Cash is an asset, so it credits Opening Balances and debits Petty cash. This is a student loan Liability account. As you see, the Opening Balance is debited and decreased. The loan is credited and Liabilities increased. As payments are made, the reverse happens. The loan, being a credit account, is debited and the balance decreases. Opening Balances moves closer to 0 as well. The savings account, being a debit account, is credited and the balance decreases. There has been no change in Equity since Liabilities and Assets decresed by the same amount. Ok well in that case here are my thoughts.  Its been a while since I've done this type of school work so hope it's right/helpful.  AR Oustanding = Avg AR / (credit sales/Operating Cycle*) = 35   *I'm guessing they didn't give you sales for the year or else I would divide by 365 but since you mentioned operating cycle I'm assuming thats the sales number you were given.  So you want to divide the sales by 50 and then times it by the 35.  Should give you the average AR.  Inventory - I really don't remember having to calculate this so I'm just thinking logically here.  You should be able to take COGS divide by the days in the period then times it by In Invetory.  So = (COGS/Operating Cycle)* In Inventory = (COGS/50)*15  Accounts Payable....man, I'm afraid to drive you in the wrong direction on this one.  Avg Accounts Payable/(COGS/Operating Cycle) = 40  Plug in COGS, divide by the operating cycle, 50 then times by 40, the days vendor credit.