GnuCash: Paying for others - direct or indirect transfers?

Question

Suppose I am going to a restaurant with 5 friends. Suppose we are in the US because then we have to pay together. Suppose I take the bill of 500$ with my credit card. I receive the money of one friend via Venmo (100$), of one via PayPal (100$); one friend pays me cash (100$) and I pay for myself and my girlfriend (200$).

Now I could enter the transaction on my credit card account Liabilities:Credit Cards:Visa using the following splits:

Friend 1      Assets:Venmo                   100
Friend 2      Assets:PayPal                  100
Friend 3      Assets:Cash:Wallet             100
Girlfriend    Expenses:Gifts                 100
Myself        Expenses:Dining                100
              Liabilities:Credit Cards:Visa       500

An alternative way would be to have an intermediate account (or intermediate accounts) Assets:Lent:Friend 1, etc or Assets:Lent:Friends and the splits look like:

Friend 1      Assets:Lent:Friends            100
Friend 2      Assets:Lent:Friends            100
Friend 3      Assets:Lent:Friends            100
Girlfriend    Expenses:Gifts                 100
Myself        Expenses:Dining                100
              Liabilities:Credit Cards:Visa       500

Then, I separately make bookings from my Venmo & PayPal accounts, but also from my cash account. The individual transactions within Assets:Lent:Friends would look like:

Got money back from Friend 1   Assets:Venmo                   100
Got money back from Friend 2   Assets:PayPal                  100
Got money back from Friend 3   Assets:Cash:Wallet             100

Which of the two ways is the more preferred one? (I know both work)

Jivan Pal · Answer

It's essentially like you've invoiced your friends for the food bill. I would credit the credit card for the full transaction, debiting your portion to Expenses:Food or similar, and debiting the amounts owed by your friends to Assets:Accounts Receivable. When they cover their debt to you, then you will credit Accounts Receivable and debit whichever of your accounts they sent the money to. Doing this with a split transaction will make reconciliation nicer, because then your credit card statement will match the GnuCash entries, but whether you use a split transaction or not is your choice.
Here's what such a split transaction would look like when entered into your credit card ledger:
+-------------+--------------------+----------------------------+---------------+---------------+
| Date        | Description/Memo   | Account                    | Payment/Debit | Charge/Credit |
+-------------+--------------------+----------------------------+---------------+---------------+
| 18 Sep 2020 | Fancy Restaurant   |                            |               |               |
+-------------+--------------------+----------------------------+---------------+---------------+
              | Credit card charge | Liabilities:Credit Card    |               |        500.00 |
              +--------------------+----------------------------+---------------+---------------+
              | My owing           | Expenses:Food              |        200.00 |               |
              +--------------------+----------------------------+---------------+---------------+
              | Alice's owing      | Assets:Accounts Receivable |        100.00 |               |
              +--------------------+----------------------------+---------------+---------------+
              | Bob's owing        | Assets:Accounts Receivable |        100.00 |               |
              +--------------------+----------------------------+---------------+---------------+
              | Charlie's owing    | Assets:Accounts Receivable |        100.00 |               |
              +--------------------+----------------------------+---------------+---------------+

Accounts Receivable will then show one item for each split that is associated with it:
+-------------+--------------------+----------------------------+---------------+----------------+
| Date        | Customer           | Transfer                   | Invoice/Debit | Payment/Credit |
+-------------+--------------------+----------------------------+---------------+----------------+
|             | Memo               |                                                             |
+-------------+--------------------+----------------------------+---------------+----------------+
| 18 Sep 2020 | Fancy Restaurant   | -- Split Transaction --    |        100.00 |                |
+-------------+--------------------+----------------------------+---------------+----------------+
|             | Alice's owing      |                            |               |                |
+-------------+--------------------+----------------------------+---------------+----------------+
| 18 Sep 2020 | Fancy Restaurant   | -- Split Transaction --    |        100.00 |                |
+-------------+--------------------+----------------------------+---------------+----------------+
|             | Bob's owing        |                            |               |                |
+-------------+--------------------+----------------------------+---------------+----------------+
| 18 Sep 2020 | Fancy Restaurant   | -- Split Transaction --    |        100.00 |                |
+-------------+--------------------+----------------------------+---------------+----------------+
|             | Charlie's owing    |                            |               |                |
+-------------+--------------------+----------------------------+---------------+----------------+

If you were charging interest on your friends' debt, then I might class it as an asset, e.g. under Assets:Loans Receivable, since it will yield income. Alternatively, you can just use Accounts Receivable for this purpose, in the same manner that a business might charge statutory interest on an overdue bill for services.

GnuCash: Paying for others - direct or indirect transfers?

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