If managing your checkbook is the first step in tracking your finances, then using expense accounts to see where you are expending money is a close second step. This chapter will give you an understanding of how GnuCash uses expense accounts to help you keep track of many different categories of transactions.
An expense type account is used to allow you to track how much you spend on specific expenses. Technically, expense accounts are not a part of traditional accounting, but have become common with the increased capabilities of computer-based accounting systems. Many people’s first experience with tracking expenses comes from Quicken(tm), where transactions can be assigned to one or more categories. In GnuCash, these categories are set up as separate accounts, which are designated as Expense type accounts. This allows GnuCash to apply the rules of double-entry accounting consistently. Expense accounts can be as detailed or as general as you need. Some users need only a few accounts for personal expense tracking. Others use GnuCash expense accounts to manage their expenses in great detail. The level of detail you choose is up to you. Keep in mind that with GnuCash, you can change accounts for transactions, so if your needs change later on, it is possible to move transactions around.
Setting Up Accounts
Simple Expense Account Setup
For many users, the easiest way to set up expense accounts is to check the "Common Accounts" when you create a new Account Hierarchy. This will establish many of the most common expense accounts that users need. See "New Account Hierarchy Setup" in Chapter 3 of the Help guide for more information.
Complex Expense Account Setup
If you have different expense accounting needs, you can refer to [chapter_txns], or Chapter 5.4 in the Help manual for instructions on how to create accounts.
Typical reasons for adding new or different expense accounts include: to track expenses for particular business purposes (e.g., specific types of supply expenses), to track expenses for particular tax purposes (e.g., tax expenses that must be reported to others), or simply to track expenses that are meaningful to you (e.g., payments made to a particular charity).
Entering Expense Transactions
While it is possible to enter transactions directly into expense accounts, it is not normally how these are entered. For most people, transactions for an expense account are added when the user is entering data into the other account in the transaction. In other words, if you have an expense account for Charitable Donations (e.g., Expenses:Charity), you will typically add a transaction to the expense account by assigning a check in your checking account register to the Charity account.
If you open an expense account, you will see a register similar to most others you find in GnuCash. The informal column headings for the transaction amounts are slightly different, however. The left (debit) column will read Tot Expense, while the right (credit) column will read Tot Rebate.
Other Considerations for Expense Accounts
Because expense accounts are generated entirely by you, there are no statements against which you would reconcile your data. Therefore, there is technically nothing to reconcile. You can, of course use the reconcile process for expense accounts, which will lock the transactions for future editing.
One point to consider is that as your use of GnuCash continues, the balances in these accounts will grow, since there are usually very few credit transactions that reduce the balances. There is nothing wrong with this situation, but some users may wish to clear the balances in their expense accounts periodically. Zeroing transactions can be entered that transfer the balance of the account to an Equity account. GnuCash includes a Closing Books procedure that includes zeroing out expense accounts. Keep in mind that this is not necessary, and that if you need to gather information on a given expense account, you can use various reports to extract that data without zeroing the account out.