"For years I've used a spreadsheet to manage my finances. Last November, I discovered GnuCash. I learned rather quickly that I was reinventing the wheel with my spreadsheet."—extracts from the blog of a new user of GnuCash.

GnuCash is a personal and small business bookkeeping and accounting software. In this book, we address the needs of self-employed, micro enterprises, home businesses, Small Office/Home Office (SOHO), and other small businesses. We also include a chapter on how non-profits could use GnuCash for bookkeeping and accounting.

As a small business owner, partner, or leader, here is what you can do with GnuCash:

This should give you a taste of what is to come before you dive deep into the chapters in this book.

The core function of accounting software is to allow you to keep track of your business transactions in an orderly manner. Accountants call this bookkeeping. In plain English, bookkeeping is nothing but keeping a meticulous record of all the financial transactions of a business. But before you can record the transactions of a business, you need proper places to record them. In other words, you need to set up accounts to enter the transactions into. "Account" is a term used by GnuCash for grouping a set of similar transactions. For example, you can have an account named "Office Supplies" to record all transactions related to buying stationery. Some other accounting applications call this a "Category". So, our first task is to get started with creating the accounts. We are going to use a built-in template provided by GnuCash to set up an account tree.

Why does a small business need an account tree? Think of the account tree as the table of contents of a book. A book is generally organized into chapters, sections, and subsections. With the help of a table of contents, you can find what you are looking for easily in a large book. In a similar manner, your business might have many thousands of transactions in a year. If you organize your accounts in a convenient tree, you can find transactions when needed as well as create reports on different kinds of expenses and so on.

In this chapter, we will: