expenses and incomes

Asked by Pierre Toulouse

I am wondering why Homebank is considering positive amount transactions as income and negative amount transactions as expense. From an accounting standpoint, income and expenses should be related to categories, not to the transactions themselves.

For example, if I pay the 3000$ rent for myself and my 2 roommates, I would record that as a 3000$ expense (-3000$), and when my roommates pay their share, that would be a 2000$ negative expense (+2000$). In reality, I spent 1000$. I did not spend 3000$ in rent and have an income of 2000$ from renting an appartment.

Same goes if I purchase something at 300$ and return it because it is broken. Purchase and return would both go to the expense category. I did not spend 300$ and have an income of 300$, I spent 0$.

IF I really consider something as a income, I will book it in a income category.

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Lindsay Lorden (ludwigwn) said :

I deal with this situation from a different perspective. Essentially -

1. negative means money out, positive means money in.
2. The category:sub-category defines whether it is "Expenditure" or "Income".

So in your case:
You pay the rent - that's an expense that incurred.
Flatmates contribute/pay their share - that goes against the category:sub-category as "negative expenditure" and thus reduces my actual expenditure by the appropriate amount.
Net effect - balance paid in the category:sub-category is my share of the rent.

How I handle it:
We get one mobile bill covering the family, and our son pays us his by AP.
So I code his mobile cost to his own category:sub-category (e.g. "Loans & Liabilities:Son's Costs" configured as 'Expense') in the bill, and then his AP entry into our bank account uses the same.
Thus I know by looking at the balance of "Loans & Liabilities:Son's Costs" whether he's behind (he's never ahead ;-} ), and can show him if need be every related transaction.

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Pierre Toulouse (ptoulouse) said :

Hi Lindsay,

I do the same as you do. I realize that the negative expense in my question makes things confusing. I edited my question to clarify.

Indeed, -3000$ + $2000 leaves a balance of -1000$ which is my share. However, running the predefined report (Expense pie chart) will show an expense of -3000$. The only way you will get -1000 is if you run an income and expense table report where the -1000$ will show in the Total column.

Using a liability category could work in the case of the roommates (not for the refund), but you would need to exclude the liability category from your expense report (every time you run it).

Can you help with this problem?

Provide an answer of your own, or ask Pierre Toulouse for more information if necessary.

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