Making the most of KMyMoney
Table of Contents
Whilst you could go ahead, clicking some buttons and filling 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 KMyMoney.
You will get a more effective system if you spend a little time planning how you are going to use KMyMoney, so follow the steps given here.
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.
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.
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