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If You Knew Cash Like GnuCash Knows Cash

With GNUCash and a bit of discipline, you can quickly begin to manage your money and accounts for a variety of financial needs.

One of the final frontiers for users, and open source programmers, is the dark realm of the financial application. Plenty of office suites, customer relationship managers, IDEs, and various groupware packages abound, but a dearth of solid and usable financial programs are available. GnuCash fills the void of a financial package for Linux users but GnuCash, contrary to what some believe, will not replace Quickbooks although it does have some very advanced features. It is more of a competitor with Microsoft Money or Quicken for personal account or small business accounting. It may fill the need, however, for a large number of you who feel stuck with a Windows-only financial application solution.

GnuCash is a rich application with the ability to manage your money and accounts for a variety of financial needs ranging from personal checking account, to mutual funds, retirement accounts, home loan, business accounts, and even spousal income. Some of its features that make it well worth investigating — especially for small businesses — are listed on the Web site.

    Listing 1: GnuCash 2.2.1 Features

  • Double-Entry Accounting
  • Stock/Bond/Mutual Fund Accounts
  • Small-Business Accounting
  • Customers, Vendors, Jobs
  • Invoices, Accounts Payable, Accounts Receivable
  • QIF/OFX/HBCI Import, Transaction Matching
  • Reports, Graphs
  • Scheduled Transactions
  • Financial Calculations

Users familiar with accounting terminology will understand the entries in the list above. Double-entry accounting is often confusing to non-accountants, and refers to the type of transaction tracking that has to do with subtracting money from one (or more) accounts and posting those funds to other accounts.

It is sometimes referred to a multiple entry accounting since the transactions may involve more than one account. This type of accounting refers to something called the Principle of Balance and is common in the financial world. GnuCash is built around this principle so your understanding of it is essential to your success in using the program.

You may also manage your personal investment accounts, dividends, depreciations, amortizations, and other complex calculations with GnuCash. By entering data and variables into your account sheets, you can even produce projections and graphs based on the information given.

Grab GnuCash

To get the latest stable release, go to the download links, which will redirect you to the GnuCash project site at SourceForge (http://sourceforge.net/projects/gnucash). Other stable releases are available, via apt-get or yum, as packages from your favorite distribution’s repository. Once installed and started for the first time, you are presented with the Welcome screen shown in Figure 1. This dialog will walk you through creating a new set of accounts, importing Quicken files, or to open the new user tutorial.

The GnuCash Welcome Screen File
Figure One: The GnuCash Welcome Screen File

Selecting “Create a new set of accounts” presents you with a blank Accounts screen titled ‘no file’ and the “New Account Hierarchy Setup” screen shown in Figure 2.

The New Account Setup Screen File
Figure Two: The New Account Setup Screen File

The number one reason to use GnuCash is that it’s simpler than a paper register, because auto-completion and other entry shortcuts, not only do work for you, but reduce data entry errors.

GnuCash also uses a set of Druids, instead of Wizards, to assist you with various activities in the program such as setting up a new account, investment portfolio, or online banking. In fact, just about everything you need to do is accompanied by a Druid for assistance.

The first step in the new accounts setup process is to choose the currency type you use most often. It is possible, once your accounts are initially setup, to use multiple currencies. The next step, shown in Figure 3, is a complex screen displaying a list of account types and their subcategories.

Choose Accounts to Create File
Figure Three: Choose Accounts to Create File

You may choose more than one account type in the list. The default is Common Accounts, which includes your basic family home expenses and assets. For most non-business users, this may be the only account type you will ever need. For assets and liabilities that need more in-depth accounting, you may select from one or more of the following:

    Listing 2: GnuCash Account Types

  • A Simple Checkbook
  • Business Accounts
  • Car Loan
  • CD and Money Market
  • Childcare Expenses
  • Common Accounts
  • Education Loan
  • Fixed Assets
  • Home Mortgage Loan
  • Homeowner Expenses
  • Investment Accounts
  • Other Loans
  • Renter Expenses
  • Retirement Accounts
  • Spouse Income
  • Spouse Retirement Accounts

Checkbook Setup

The most basic of all the Account Types is the Simple Checkbook. To set up your own Checkbook in GnuCash:

    Listing 3: Checking Account Setup

  1. Select File –> New –> New File and the New Account Hierarchy Druid launches.
  2. Click Forward.
  3. Deselect Common Accounts, then select A Simple Checkbook, and click Forward.
  4. Make changes on this screen, if any, then click Forward.
  5. Click Apply.

You are now presented with your new Simple Checkbook. To begin entering data into your register:

    Listing 4: Entering Transactions

  1. Click (+)Assets, (+)Current Assets, and double-click Checking Account. The check register opens with the current date selected in the first entry.
  2. Pick a date with the Date Picker for the first entry. Your first entry should probably be a balance or a check so that you will have something to draw funds from.
  3. Enter a check number into the Num field. TAB to the Description field.
  4. Enter a description of the transaction. TAB to the Transfer field.
  5. Use the Choice List button to select from the list of Expenses, Assets, or Income categories to further describe your transaction. TAB to the Deposit or Withdrawal column. You can select from existing options or create your own if you don’t find one that works for you. Use the Accounts tab to add new options to this list.
  6. Enter the amount of the Deposit or Withdrawal in the appropriate column. TAB or ENTER to advance to the next line in the Register.

The R column stands for reconcile when you check your entries against your monthly bank statement. To reconcile, click into the R column for the transaction then click the Reconcile button.

Figure 4 shows a list of sample entries for a Checking Account.

Sample Checking Account Register File
Figure 4: Sample Checking Account Register File

Bank Online

Select the type of account(s) you need and proceed through the Druid until the Accounts screen appears by itself showing all of your new Account Names, Descriptions, and Totals. This is the screen with which you will interact when dealing with your accounts and is the file that opens by default every time you launch GnuCash.

One of the most impressive, but complicated, aspects of GnuCash is the ability to connect to your online bank accounts. You may access this Druid by selecting Tools –> Online Banking Setup. You will probably have to contact your bank concerning some of the entries that are required to make this connection and please realize that not all banks will support this type of connection. To make the connection to your bank, you must first choose the backend you need to connect to your online account.

    Listing 5: Online Banking Backends

  • DTAUS backend using AqDTAUS
  • HBCI backend using AqHBC/li
  • Dummy backend
  • OFX-DirectConnect backend

In Germany, or when using a German bank, you have to use the HBCI backend. For just about everyone else, you should try OFX first.

Beep Beep Beep

Like other parts of GnuCash, you’ll find that backup and restore are pretty sophisticated and well thought-out. Each time GnuCash is opened, your Accounts file is opened along with a copy of the Accounts file with the same filename as your original with the extension of .xac, and a corresponding log (Accounts filename.log) file. The .xac file is an exact copy of your original Accounts file. The log file is a transaction-only file since the last successful save. Save often if you have a version older than 2.2.0 or setup the Autosave feature under Edit –> Preferences –> General. The default auto-save interval is five minutes, which will be sufficient in most cases. Your level of paranoia should dictate your auto-save interval.

Should your original Accounts file become corrupt, it is fairly simple to recover most, or all, of your data.

    Listing 6: Corrupt Accounts File Recovery

  1. Rename the original file.
  2. Copy your backup file (.xac) to a new file without the .xac extension.
  3. Locate your latest log file (Filename.YYYYMMDDhhmmss.log where YYYYMMDDhhmmss is the timestamp).
  4. Open GnuCash, File — > Import –> Replay GnuCash .log file…
  5. Browse to the latest log file, select, and open it.

The default location for your Accounts file, backup, and log file is your home directory. Your last good backup file and latest log file should get you within a transaction or two before the incident that caused the corruption. In some cases, your Accounts file will be completely restored. This is a very advanced feature that is generally associated with high-end accounting packages that use backend databases to manage transactions.

It’s a Hit

The online help files that come with GnuCash, as well as the documentation provided on the gnucash.org Web site, is some of the very best available with any open source application. The new user tutorial is well-written and complete. You may need no other references to get you up and running quickly with GnuCash.

Although there is no Quick Start Guide, you will find that GnuCash uses familiar financial nomenclature, account types, and controls. If you have ever used another money management or financial package like Microsoft Money, Quicken, or Quickbooks, you will be GnuCash proficient almost immediately.

GnuCash is also very flexible for you old pros out there as most every aspect of your accounts is customizable via the menu bar Edit option or the context sensitive right-click menu. The right-click menu is available for every account and entry type.

GnuCash is a great financial application and one that is ready to add to your Desktop repertoire. It is like any other financial application though; you have to have the discipline to enter your information accurately and keep it updated regularly.

Comments on "If You Knew Cash Like GnuCash Knows Cash"

reedmb

I use GnuCash for all my personal finances. Anything is easily entered. The article is fair summary of features and benefits. (I’ve used Quicken for several years before GnuCash. I’ve never had a reason to go back to Quicken.)

For a small business, and many of us have a small business, it is still wonderful. However, it does not have a payroll tax calculation or sales tax recording features.

Yet, even if you have employees, and if you use a payroll service, GnuCash can still meet your needs (simply create accounts and enter payroll data to detail level you desire).

For sales tax, it can be as simple as transfer of output from your cash register into GnuCash accounts and send in form as required (last I used Quickbooks, you still had to fill out sales tax information manually into a paper or on-line form).

Reply
arifk

It would’ve been nice to see the topic of security and privacy covered in this review. Is the data stored as encrypted? What about online security? These are just some of the concerns I would have about using any financial application.

Reply
leemon

Double entry accounting was invented around 1536.

It is one of the extraordinary, elegant intellectual inventions that makes business possible. It is radical and important in the saame sense as the decimal number system and Euler’s polyhedron theorem.

GnuCash is a wonderful implementation of double entry accounting. It is much less confusing than the “T accounts” of accounting textbooks.

If anything, set up a GnuCash system and go read some accounting textbooks so you can appreciate the powerful way GnuCash brings control and understanding to business or non-profit organization activities.

The weakness of GnuCash is it does not yet have an implementation of the “annual closing” process where expenses are moved to a dated file.

The “closing” process has been a frequently requested GnuCash development for several years now.

Reply
alecclews

As this article may be read by Windows and OS/X users looking for information…

1) There is a Windows port which installs easily and seems to work. http://wiki.gnucash.org/wiki/Windows

2) GNUCash can be installed on a Mac using DarwinPorts. However it’s a struggle, or it least it was for me when I did it eight months ago. http://gnucash.darwinports.com/ (scroll down the page for instructions)

Reply
dougalder

Awesome, thanks for this information. Quicken is the only thing left that has kept me with a dual boot system. If I’m able to get this working and updating from my bank here in Canada I see a reformatting in the near future :)

Reply
chip33az

I thought GnuCash recently implemented the closing entries.

From the 2.2.4 changelog.
#106383: feature request: close year end

I have seen it, but not tried it yet.

Reply
chip33az

I don’t know about the online security, but their FAQ talk about data encryption (I think it was the FAQ).

Anyway, they state it is up to the OS to do the encryption.

I use GnuCash at home and I encrypted my drive with Ubuntu. I also have a thumbdrive encrypted with Truecrypt that I use for backups.

For XP/Vista one can encrypt their entire drive with Truecrypt as well.

Reply
tkilleen

KMyMoney is just as good and a lot simpler to use and set up as I am NOT an accountant nor do I plan on being one within the next century. Software should so easy to use you ever hardly look at documentation or help files. If you need to read an accounting book, it’s over 80% of the people I know, except the Bean Counters who love this stuff. just surf on over to: http://kmymoney2.sourceforge.net/index-home.html . Bye, Tiki

Reply
jmdennis

I disagree that kmymoney2 is easier to use. I am using the latest version 0.9 and it is harder to use so far. If I click on the item to have it fill in the category for me the first time I enter in some thing like say Carrows it pulls up a new window with all the items and I select one. For me it is easier in GNUCASH. The reason for this is I just enter in the date and then enter in some thing like Carrows. It fills in the category for me and then jumps me over to the amount field. If I want to change the category it is very easy to do. I like kmymoney2 but they are making it way to hard to just enter in items. I am pretty bad about entering items like I should so I am usually left with a lot to enter and so gnucash is the easier of the 2 for me right now.

Reply
walterbyrd

What foss financial software seems to be missing:

All of the following is based my limited understanding, and my opinions. Please correct me if I am wrong about any of this.

* Cost advantage: QuickBooks simple start is free. Or I can buy the full version of QuickBooks about $160. Seems to me that any cost advantage of using a foss alternative is negligible.

* Ease of use: Somewhat debatable. But some people site this as a primary reason for Intuit’s amazing success with QuickBooks – supposedly 80% of small businesses use QuickBooks. Although, I have to wonder how the number of foss users can be accurately counted?

* Integration with online banking: my understanding is that only Intuit or Microsoft products can fully integrate with online banking. Not absolutely sure about that.

* Payroll: very regional, and changes often, therefore not well suited for foss.

* Taxes: somewhat regional, and changes often, therefore not well suited for foss.

* Wide acceptance: I think most businesses are much more comfortable using products that are accepted standards.

* Available add-ons: Intuit has a very active community of 3rd party developers. You can buy practically any kind of an add-on you can imagine. These add-ons cost money, but at least they are available.

* Major company: I think a lot of businesses are not comfortable with a product unless there is a major company behind that product. I have to admit, even I am not comfortable with software products that are essentially one man operations.

* Support: I can always hire somebody who knows quickbooks, or find a “ProAdvisor” consultant, or I can get support from the company, and there are hundreds – if not thousands – of developers who specialize in developing for quickbooks. I can not see where that is true for any project.

* Training availability and costs: I can hire people who already know quickbooks. If I hire somebody to work on some foss alternative, then there will be a significant training expense. Of course, there is also the issue of training availability.

* Documentation: If I had to pick one thing that kills the usefulness of more foss projects than anything else, this would win in a slam-dunk. Of course, this varies among projects, some foss projects have great documentation. But, I can always find plenty of books, or other documentation for popular proprietary financial apps.

* Wide acceptance by accountants: maybe as many as 200,000 accountants, use QB and recommend it to their clients. Some accountants will charge much more for files that are not in QB format.

* Widespread 3rd party integration: QB has much better 3rd party integration. For example, ecommerce packages like oscommerce, and magento, work with quickbooks, not foss alternatives. Msft accounting works with ebay. I can not find that sort of integration with foss software.

Reply
stptrx

I am no wiz when it comes to these programs. There are a couple comments that seem to tell me you did not read the article before commenting. I am going to point out what the article does say just for those people whom may also have missed them.

“contrary to what some believe,[GnuCash] will not replace Quickbooks although it does have some very advanced features. It is more of a competitor with Microsoft Money or Quicken for personal account or small business accounting.”

“One of the most impressive, but complicated, aspects of GnuCash is the ability to connect to your online bank accounts. You may access this Druid by selecting Tools –> Online Banking Setup. You will probably have to contact your bank concerning some of the entries that are required to make this connection and please realize that not all banks will support this type of connection. To make the connection to your bank, you must first choose the backend you need to connect to your online account.

* Listing 5: Online Banking Backends DTAUS backend using AqDTAUS
* HBCI backend using AqHBC/li
* Dummy backend
* OFX-DirectConnect backend

In Germany, or when using a German bank, you have to use the HBCI backend. For just about everyone else, you should try OFX first.”

again I am no expert on these and obviously do not need the advanced features you speak of in Quickbooks (which again has features available that makes GnuCash “not replace Quickbooks although it does have some very advanced features”) and I am unable to comment on what formats Gnucash can/can not export. It does handle/import those file formats commonly used. For home users and many small business owners Gnucash does seem a viable alternative.

As pertaining to documentation the article speaks on it’s strengths

“The online help files that come with GnuCash, as well as the documentation provided on the gnucash.org Web site, is some of the very best available with any open source application. The new user tutorial is well-written and complete. You may need no other references to get you up and running quickly with GnuCash.”

and it’s weaknesses

“Although there is no Quick Start Guide, you will find that GnuCash uses familiar financial nomenclature, account types, and controls. If you have ever used another money management or financial package like Microsoft Money, Quicken, or Quickbooks, you will be GnuCash proficient almost immediately.”

Over all the article seems to fairly assess GnuCash as a viable alternative for those that do not need something more then is offered in quicken or msmoney. For those of you that need more features GNU Cash does “not replace Quickbooks although it does have some very advanced features.”

Reply
eionmac

20090725 Lack of a proper example set of accounts for UK VAT (UK sales tax) or EU VAT allowing extraction of the Value Added Tax information discourages any use of Gnu/Linux for start ups using Linux in UK. While almost all jobs in a new start up can be accommodated by Linux; the recent free release of \’MS Accounting Express\’ makes use of a MS OS with MS Accounting Express and other FOSS programs for other needs e.g. Open Office.org, Thunderbird and Firefox browser now makes this a choice whereby the new start up can comply legally in a way that is impossible with only FOSS. Business Accounts under FOSS for EU/UK use are the Achilles heel of Linux. The improvement of GnuCash to suit EU VAT use would make Linux a simple one stop choice for a start up or small business.

Reply
gmhoward

GNUCash and KMyMoney are certainly very powerful personal and small business finance programs. But if you are just looking for a simple way to monitor your budget and determine where your money is going, I highly recommend HomeBank (http://homebank.free.fr). It is also free and doesn\’t use double entry accounting, which just made my (non-accountant) life much easier.

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Can you please help with a very basic question? I have a dual-boot system with Windows XP and Ubuntu 11.10. I use both the systems fairly often, so I wanted to know if I install GnuCash on both systems, will the data files be common? So for instance I update some transactions while I am in Ubuntu, will those transactions show up when I use Windows on another ocassion?
I’d really appreciate your help on this, because I’m a newbie and can’t find the answer to this anywhere else on the net!
Regards
Rajan

Reply

    I believe that they will. I keep my data file in Dropbox so it can be access from either boot or different computers. Be sure to back up as I think I might have lost some of my work due to failure of the data file to upload into Dropbox and then I went and worked on an older file on a different computer when I got home (I think the problem was that I was working from MegaBus and the internet connnection from the moving bus was not the best).

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