tracking "debt" to charity, with cost accounting

[Terry Boon]

On Wed, Aug 29, 2001 at 12:29:12PM -0500, Tim Nowaczyk wrote:
> On Wed, Aug 29, 2001 at 11:47:17AM -0500, Linas Vepstas wrote:
> >On Wed, Aug 29, 2001 at 03:53:16PM -0000, Seth Gordon was heard to remark:
> >
> >This will keep your bank balances correct, and will also have that
> >nagging balance in c/p that says 'time to cut a check to some charity'.

> I like this solution in lieu of budgeting and will probably use it.
> Thanks.  I do, however, see a problem with it if I were doing my
> books like an accountant.  I think we had a thread earlier (A rather
> heated thread) about not putting money into expense accounts until
> it is actualy spent.

The UK approach to company accounts definitely permits (and even
requires in some cases) recognising expenses (ie "putting them into
expense accounts") even before the cash is paid out.  (Whether this is
done depends partly on how commited the expense actually is.)  Until
the cash is paid, it is treated as an accrual (liability).

However, for the purposes of one's personal finances and tax
calculations, this may not be a useful principle to follow: I missed
the thread discussing this.  (Personally, I *do* follow this
principle, and work out the cash position outflows when necessary.)

> If I were to follow your advice every two weeks (pay-day) and never
> give anything to charity, then, when I close my books for the year,
> I'll look very charitable but have a big liability.  On my tax
> statements I'll have to use (expense:charity - asset:c/p) in order
> to calculate my taxable deductions instead of expense:charity like I
> should.

I'm a little surprised that the "c/p" account is described as an asset
account; I would have treated as a liability account instead.

Remember that, after the first year, the cash you will have paid to
charity during the year will be

  (year-start value of liability:charity)
+ (expense:charity for the year)
- (year-end value of liability:charity).

-- 
Terry Boon, Hertfordshire, UK
terry@counterfactual.org