GnuCash is a powerful and intuitive accounting program for managing finances for both individuals and small businesses. Thanks to the integration of the Home Banking Computer Interface (HBCI), the European standard for online banking, the program can retrieve bank account activity online and arrange for the transfer of funds. In addition, the GnuCash app lets the user on the go use mobile devices to manage their finances.

The source code and the binary packages for various Linux systems can be downloaded from the project site [1]. Under Ubuntu, you can use the command:

sudo apt-get install gnucash

to install GnuCash. Once setup is complete, you can use a shortcut to start the program, or you can start it from a terminal using the gnucash shell command.

Setup

After you have installed GnuCash, you will need to set it up. File | Import lets you incorporate data from an existing accounting process into GnuCash. The program supports both QIF and QFX/OFX formats, which are widely available. This means you can import data from your old accounting software into GnuCash, which should make migrating to GnuCash easy.

If you don't already have an accounting system, the installation assistant will help with selecting the correct settings (Figure 1). In order to start with a new file, you should select File | New File in the start screen, which at this point is still empty. Private users will need settings that are different from those needed by users who run a business or work as a freelancer.

Figure 1: Thanks to the installation assistant, it is simple and convenient to create a new file. The program offers accounting frameworks for both business and private use.

First, select the default currency. Next you need to decide on the accounting system. The default setting General Accounts usually suffices for private users. Others such as Real Estate can be added.

Business owners can choose from various standard accounting frameworks (see the "Accounting Framework" box). If necessary, you use the next step to modify the chosen framework. This can also be done once setup has been completed.

After you have selected all of the required accounts, it is time to record each account's opening balance. This should include checking and savings accounts, your credit card balance, and the amount of cash that you have on hand. This can also be done at a later point in time. Finally, you should decide on the name and the location for saving your new file. This concludes the setup process.

Account Overview

Upon startup, GnuCash shows an account overview (Figure 2) with the balance for each account. This is where you will find a summary of your assets, such as cash, bank balances, house, car, and others. In addition, there is a place for liabilities, such as credit cards and card balances. At the bottom of the window, GnuCash computes your equity, meaning the amount that is left over after subtracting liabilities from assets.

Figure 2: The account overview gives you a summary of your financial status.

The account overview also contains a list of your income and expenses. At the lower edge of the screen, GnuCash computes your profit, which is what is left over after expenses are subtracted from income.

You can set up new accounts and delete accounts that are no longer used with right-clicks and the Context menu in the account overview. Right-clicking on an existing account causes a menu to display. Select Edit Account from the menu for editing account settings. This would involve changes such as a new account name or saving the account number for a bank account.

Entering Amounts

Now you can get started on your accounting. GnuCash uses the double-entry bookkeeping system (see the "Double-Entry Bookkeeping" box). This means that every transaction you enter creates a reverse entry on another account. For example, if you have bought clothing and paid for it with your credit card, the transaction will be posted to the Borrowed capital | Liabilities | Credit card account. Double clicking on the account overview opens a new tab where you should enter the transaction. The date of purchase goes in the first field; a receipt number goes into the second field if you keep your receipts and number them sequentially.

You can enter detailed information for the description of the purchase. Next, select the account for the corresponding reverse transaction. In this case, it is Expenses | Clothes . GnuCash then posts a liability on the account for your credit card and simultaneously an entry thus increasing the liability amount on your clothing expense account. The letter n in the next field stands for not confirmed . If you subsequently receive a bill from your credit card company containing the same payment you have posted, then by clicking you can change the n into a c for confirmed. This means that the posting has been balanced with the statement of account (Figure 3).

Figure 3: Entering transactions is quick and uncomplicated with GnuCash.

GnuCash is capable of learning. The program recognizes recurring patterns in your entries. For instance, GnuCash will recommend the correct expense account for the next entry you make that is described as clothing.

Sometimes the entire amount of particular income or expenses cannot be allocated to a single account (see the "Tip: Entering Statement of Income" box). Instead, it will need to be divided among various accounts. For example, at the grocery store, you purchase food, body care products, and cleaning supplies and pay for everything with cash. In this situation, you would need to divide the cash outlay among the three relevant expense accounts.

To do this, leave the transaction field empty at first. Right-clicking in this field causes a context menu to open where you should select Split transaction . Now you will see that there are two lines available for the corresponding reverse entry (Figure 3). Select the appropriate expense account and enter the cost of the relevant item in the Description field since the entire amount is an expense from the perspective of the cash account. The expense account considers this an increase and thus also an increase in expenses.

Online Banking

GnuCash can import financial data from several types of files. In addition, you can download transaction data from your financial institutions directly to your registers. In Europe banks usually use HBCI. In the United States, you generally must use OFX-based data for online banking.

Using HBCI, the program lets you arrange for transfers and payments directly out of your bank account. To use this functionality, you will first need to have your bank enable your account for HBCI. In order to set up a new HBCI access in GnuCash, you will need to know the URL for the HBCI server at your bank as well as your access data, which is available from your bank. Depending on your bank, you may also get an HBCI chip card, which will require a card reader device. Next, select Tools | Install Online Banking to start the GnuCash installation assistant. You will then be guided through the installation process, which is different for each bank. Your bank's customer service department can help should problems arise.

Once you have successfully installed HBCI access, you should retrieve the transactions for your account, ideally since January 1 of the current year. It is important to record the correct starting amount, meaning the balance listed for your account on January 1. This is a requirement since GnuCash will compute all transactions according to the beginning balance. If the beginning balance is not correct, the program will display inaccurate amounts from that point on. After recording the beginning balance, you should go to your bank account in the account overview and select Actions | Online Actions | Query account transactions . The start date should be specified as January 1; the end date can be left as to: now . Afterwards, confirm by clicking OK . Starting with the next account balance query, you can select From: last query date . This is how you can always find transactions that you have not yet requested.

Each entry for the bank account transactions you have pulled should be allocated to an income account or an expense account. GnuCash is also capable of learning about this activity. The program recognizes recurring transactions, like monthly income or a monthly telephone bill, as well as the account allocation for each. As a result it automatically recommends the corresponding account for subsequent transactions.

In addition, you can use GnuCash to issue orders for remittance directly to your bank. This is done by selecting Actions | Online Actions | SEPA Transfer . A new window will open for entering the transfer data. If all of the data is correct, you can send the order for remittance to your bank with a single click on Execute Now . Identification methods will vary according to your bank. Typically, you will log in with a PIN, as well as potentially holding an HBCI card in front of the screen so to enable the order with a transaction authentication number (TAN).

Business Finances

The uses described above generally suffice for private individuals. However, GnuCash offers other features that match the needs of the small business owner. You can find business accounting functionality under Business . You can manage customers and suppliers, write new orders, and create billing statements, plus monitor their payment status. Data relevant to income tax returns can be exported to the tax program ELSTER (in Europe) and sent to the tax authorities.

Reports

If you are looking to manage your finances, you may need to complete a financial analysis. For example, if you want to know your advertising costs for income tax return purposes, you can set up a new expense account for Advertising costs by right clicking on the Accounts column and selecting New Account . If you need to see your advertising costs in detail, you can simply open this expense account, and it will show all of the entries marked as advertising costs. If you have also assigned a receipt number to each entry, you will immediately know for which receipt to look.

GnuCash can generate numerous other reports. These report possibilities are listed under the aptly named Report menu. Possibilities include things like an overview of your assets and liabilities or your income and expenses. Users operating a business can generate a profit and loss statement or a balance sheet.

On the Go

Users who are need to manage their finances remotely can use the GnuCash app [2]. This app provides access to the basic GnuCash functions. While on the road, you can enter transactions and generate reports.

Conclusion

GnuCash is an efficient piece of financial software that easily keeps pace with its commercial counterparts. Its operation is straightforward and intuitive. The incorporation of HBCI simplifies online banking. Thanks to the matching app, you can also manage your finances while on the road. Both private and business users will find what they need with GnuCash.