GNOME Bugzilla – Bug 421766
support "Passive" account type (able to contain both Liability and Equity accounts)
Last modified: 2018-06-29 21:30:30 UTC
It seems, that, as the knowledge of accounting spread from Lombardy over Europe, the terms "active/passive" got lost, when it crossed the Channel. As you can see at http://en.wikipedia.org/wiki/Balance_sheet, if you click on other european languages, there is nearly always this pair as top category of the sheet. The account tree should look like this: root balance-sheet active (asset): usage of capital : passive: source of capital equity : liability : Profit&Loss : Background: The Accounting Equation "Assets - Liabilities = Equity" fits the needs for private accounting. For business accounting the mathematical equivalent "Assets = Equity + Liabilities" is more adequate, you see also the size of the company (capital). I looked over the first 10 .po files in svn. That 9, I could read, translated "Liability" with their word of "Passive". So I assumed, there would be a convention, the msgid is a short form of "LIABILITIES and EQUITY". But when I tried, to build a account frame conforming german laws, I were not able, to put accounts of type "Equity" below "Passive". So I created "MyCapital" und "MyPartnersCapital" as type passive and got funny results, after adding a few transactions, in the status bar and some reports. If I would belief that, I had to declare bankruptcy. Looking a little more over .po files I get the impression, "Liability" sometimes is used in the meaning of "Passive" and sometimes as real "Liability", for which, as I understood Christian right, "Payables" should be used. I am not firm enough, to decide, what would be the right words in english, but there should be 2 distinct words. After deciding which words will be used, .po files and reports have to be reviewed, I fear. But a first step would be, to remove the restriction, so that accounts of type equity can be below the liability node. Frank
I understand what you're saying, and I can confirm that the GnuCash Equity account can only be contained by other Equity accounts (or the Root account), thus making it impossible to create a "Passive" account that contains both. I'm confused as to why your suggested account tree contains report nodes like "Balance Sheet" and "Profit and Loss". For what it's worth, the Balance Sheet report does group Liabilities with Equity. GnuCash does use Liability as Liability, not as the more generic "Passive". I don't know why you'd just start changing the translations in that manner; there are implementation internals that encode that knowledge.
>I'm confused ... "Balance Sheet" and "Profit and Loss" are implicit nodes of the account tree. They are represented by the basic reports of the same name, which most companies have to publish at the end of the bigger accounting periods: all yearly, some quarterly. > For what it's worth ... Balance in origin means "2 lances", from which the first weighing scales were build and the T-form of old account cards derive. Then there are 2 summary cards: "Profit and Loss" shows the movement, "Balance Sheet" the position. There are allways 2 sides: debit/credit, profit/loss, active/passive. AFAIK only in english speaking countries balance sheet seems to have 3 parts. This is apparent, if you have a personal company. But latest, if you have a capital company, you can see equity also as "liability on very long time". "Net worth" is important, but in other countries by law companies have to show the "total capital" by balance of active and passive. http://www.gesetze-im-internet.de/hgb/__266.html shows the structure of balance sheet as published by the german federal ministry of justice. Alternatively you can apply the rules of International Financial Reporting Standards (IFRS) [http://en.wikipedia.org/wiki/International_Financial_Reporting_Standards], but also IAS 1 http://de.wikipedia.org/wiki/International_Accounting_Standard_1 shows this structure. The different countries have the choice to determinate, if "long term first" or "short term first". The US rule ist short first (liability before equity), the german long first (equity before liability). This we have to watch in the balance sheet report. In assets, that is no problem, the account code can determinate the order. So I thought, it would be easier, if the report had only to obey active left, passive right. But may be, it is easier to insert a option, derived from country settings or in file->properties, which determinates the sort order of equity or liability in the reports. But then we have to review all .po files and purge "a?ti*". Also we should check/explain, is there a difference between "Liability" and "Payables".
The grouping of the account hierarchy in the balance sheet report (or IIRC any report) is somewhat independent from the actual "account tree window" layout of the hierarchy. Additionally, the balance sheet displays an additional top-level grouping which, as Josh mentioned, groups equity and liability under one group. As Frank finally said, his first enhancement request is to allow equity accounts as subaccounts of liability account. IMHO this is fine.
If a Passive account type was allowed, and transactions were entered into the account, where would they be displayed on the balance sheet? Under Liabilities, or under Equity? Or is this is intended to always jst be a placeholder account? (It seems so.)
Yes, it should only be a placeholder account type for equity and liability. This would allow, to have one report for countries with different sort orders. E.g. Balance sheet: The current balance sheet does not fit for the german rule "long term first": 1. Equity 2. Liability, while Switzerland has "short term first": 1. Liability 2. Equity (like USA). I am not really shure, what would be the best and cleanest way, but an alternative could be: a country or file specific option for the above order, which should be watched by the account tree view, balance sheet and possible other reports.
Reworking the order of the balance sheet report is completely orthogonal to Passive Accounts. Please open another bug report on that as that can be done WITHOUT passive accounts.
Maybe there could be an way to put extra nodes in the account tree that are purely placeholders, with no option to make them otherwise. All parents of these nodes would have to be the same way. Children could be ANY account type. This would allow you to group things as you please at the top level or levels. However, since these are not really accounts, is this is really more a display issue? Maybe instead of altering the account tree itself, there could just be some new options that affect the display of account trees in the GUI and on reports.
Actually, we already have a type of account for this. It's called a "ROOT" account type... But exposing that would imply lots of potential issues.
Maybe this is really just a GUI issue about how to display the account tree in a particular style for account tabs and GtkTreeView widgets. If we added extra nodes to the account tree itself then in the register you would have to type in these longer node names on every split and the drop-down list would be even less readable. It seems to me that reporting should be a completely separate issue. You should be able to pick whatever report style you want without manipulating the account tree to make it happen.
(In reply to comment #6) > Reworking the order of the balance sheet report is completely orthogonal to > Passive Accounts. Please open another bug report on that as that can be done > WITHOUT passive accounts. Comment #5 is now in Bug 573663 submitted.
There seems to be as much of an issue of translation of terms as of structure here. The terms active and passive are used very differently in english. This is probably why the active/passive structure did not cross the channel. 'Liabilities' can mean 'passiva' which i interpret as all that is owed out (here 'equity' means value held by the company but owned by individual shareholders, as opposed to its more common usage from the owners perspective). 'Liabilities' can also mean 'accounts payable' or 'verbindlichkeit'. Finding a way to allow for these differences in terminology as well as variations in account structure would also make gnucash more suitable for various domestic market sectors including nonprofit and SOHO users.
I don't see any reason not to introduce a "PassiveAsset" account type which could contain both Liability and Equity Account types if that would make it easier for Europeans.
As a first preparing step: https://github.com/Gnucash/gnucash/commit/8cd6c0e1c4ca528bff54ad10d7ada0034a900aa0#diff-f6122c971aeb03476bf01623b09ddfd4 Add report forms T-Account/Vertical and account types Active/Passive to glossary.
This discussion is more than 10 years old, but we still have to deal with somewhat inappropriate account types in Europe. In addition to the removal of the restriction for equity accounts (not being able to be "mixed" in the hierarchy with other types), we need a generic passive account, as already pointed out. I suggest to include also a generic account type for statistical purposes and drawing up the annual accouunts. In all german account templates I've dealt with, there is a special statistics and year-emd-closing class with equity, active, passive end even accounts payable/receivable sub-accounts. For these we've to use "active" and "liability" as workarounds. This might in part be a translation issue: Liability –
Sorry, wrong key pressed… Liability – Fremdkapital Asset – Aktiva Equity – Eigenkapital In english the opposite of "liability" is "asset", in german the opposite of "Fremdkapital" is "Eigenkapital".
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