Created attachment 348981 [details]
Screenshot of budget window with several test values

Edward Doolittle did some extensive testing with the budgets under different settings of the sign reversal preference. His tests show the budget code simply ignores this setting and always assumes "Reverse Credit Accounts". Below are his detailed findings as reported on the gnucash user mailing list [1]

I had a chance to spend a few minutes with the budget module, to try to make sense of the signs.

First, Here's what I expect: With Edit -> Preferences -> Accounts -> Reverse Balanced accounts set to "None", I would expect positive values in the budget to correspond to debits. With Edit -> Preferences -> Accounts -> Reverse Balanced accounts set to "Credit accounts", I would expect positive values in Assets and Expenses to correspond to debits, and positive values in Equity, Income, and Liabilities to correspond to credits.

What actually happens: The budget module appears to be insensitive to the Reversed Balanced accounts setting. However, its operation does correspond to "reverse credit accounts"; to be specific, positive amounts entered into Assets or Expenses correspond to debits, and positive values in Income or Liabilities correspond to credits. 

(See attached screen shot, in which (for the first six months of the budget I chose a pair of account types and entered +100 into the corresponding spaces in the budget. You can see that +100 corresponds to a debit for debit accounts and a credit for credit accounts.)

What is still wrong with the budget module:

1) The module should be sensitive to the setting of "Reverse balanced accounts". It currently does not seem to be, that I could tell.

2) The "Transfers" summary line shows the net effect of budgeting amounts to assets and liabilities. However, the transfers line is like a debit account, which causes the sign to switch in a disconcerting way when liabilities are budgeted. (See months 5 and 6, i.e., July and August, in the screenshot.) I suggest breaking the Transfers line apart into Assets and Liabilities, or, at least, showing the formula by which it is computed in the row title (i.e., "Transfers (Transfers to Assets - Transfers from Liabilities)" (that is, if "reverse credit accounts" is in effect)).

However, there's no reason to assume that an entry of type "Transfers" would be like a debit account, so instead I suggest it would be better to get rid of the "Transfers" summary line altogether and instead include separate lines for "Transfers to Assets" and "Transfers from Liabilities".

(To compound the issue, the Total line seems to be a credit account, of type Equity perhaps, which can cause a sign to bounce twice as we follow it through. +100 in Liabilities becomes -100 in the Transfers summary line which becomes +100 in the Total summary line.)

3) The Total row title should include the formula by which it is calculated, i.e., (when "reverse credit accounts" is in effect) the row title should be "Total (Income - Expenses - Transfers to Assets + Transfers from Liabilities)".

4) Since the use of negative signs in Liabilities is confusing to many people, this all should be carefully documented somewhere.

5) Note there is something odd happening in the last four months of my artificial budget when I involve "Equity". I think this means that we should think about the Total row in the budget as a credit account of type Equity, so transfers to/from Equity have no effect on the Total. Still, it seems kind of odd. I would suggest including Equity in the summary rows at the bottom (Transfers from Equity) and in the Total, which would then be "Total (Income - Expenses - Transfers to Assets + Transfers from Liabilities + Transfers from Equity)".

6) There seem to be some other problems with the budget module that not everyone has. The budget module eats up a lot of compute cycles on my Windows machine, making it very slow to respond to typing, but not on my Mac. And I have trouble with one of my credit cards not being rolled up into the total Liabilities correctly. I'll have to spend some more time tracking those problems down.

7) I haven't begun to address the budget reports, but the budget balance sheet does seem to be wrong, as Larry and others have noted.

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[1] http://lists.gnucash.org/pipermail/gnucash-user/2017-March/069556.html