It's been about two weeks since I ditched that other operating system in favor of ubuntu linux on my main machine. With that change came the switch from Microsoft Money to GnuCash, a free open source financial management software application. So far I have to say things are coming along quite well. There are a couple of things I miss and a feature or two that, while they exist, seem to be implemented in strange ways.

There is not much doubt from my experience learning to use and run GnuCash that this application's UI is the product of a developer or a development team. The application's primary interface to the world is the account hierarchy. That's it, nothing more. It's an expandable tree listing of everything in your own personal financially modeled world.

The highest level items are the "root" accounts: Assets, Liabilities, Income, Expenses and Equity. Everything you own falls under one of these categories, or top-level accounts. In accounting nomenclature, everything you own is an account; and that's exactly how GnuCash implements its account tree hierarchy. Your checking account is an asset account. Your home is an asset too. The mortgage you probably carry on your home is a liability which you own. Your credit card account, that's a liability account. Most of the money you spend on your credit card is probably for expenses.

When you use your credit card to buy dinner in a nice restaurant you accomplish two things (aside from having a nice time, stuffing yourself and bringing home a little something for pup). You add the cost of your meal to your credit card's liability account, and you allocate the cost to the proper expense account(s). For instance, some portion of the meal might be deductible as a business expense and some as personal. Regardless, the allocations add up to the total amount of your increased liability. That's double-entry accounting.

The beauty of double-entry accounting is that it's fool proof. Every transaction must balance: in one account and out another. In my experience other financial management packages aren't so strict about this balancing act. That's no big deal if you only want to get close; but trust me on this. Your accountant won't be able to help you much if you're only "in the ballpark" when the IRS decides to have a closer look at your returns.

This double-entry business at first seemed rather difficult to me. After all I'd never had to be so careful before. Making sure all the transactions balanced seemed like it would be a lot of extra work. As it turns out, it isn't.

Most transactions are the simple kind where one account is debited and another credited. For instance my electric bill just arrived. It's paid automatically every month through direct debit to my checking account. I've figured out that by simply going to the "Electric" account under the "Utilities" expense account and starting a new transaction, GnuCash automatically assumes I'm creating another transaction like all the others in this particular account. Makes perfect sense, right? Month in and month out this is the only thing that happens in this expense account. It's an easy and safe assumption to make.

Furthermore, how many transactions are exactly like this? Yeah, about all of them. Most are just the same as the previous ones in any given expense or income account. GnuCash handles them like a personal assistant who's known you and your spending habits for years.

It took me a little to get used to GnuCash, but once I saw this simple behavior in action I new this was one application worth taking the time and effort of getting used to it. Change is hard, but in this case it looks to be worth it.

Gnucash.org