Accounting Howto Question

Jack McKinney jackmc-gnucash@lorentz.com
Mon, 24 Jun 2002 09:21:05 -0500


--OXfL5xGRrasGEqWY
Content-Type: text/plain; charset=us-ascii
Content-Disposition: inline
Content-Transfer-Encoding: quoted-printable

Big Brother tells me that Jack McKinney wrote:
>=20
> 3. Medical insurance payments are not considered income for tax purposes,
> so you do not want to create an income account for their payments. The
> easiest way to apply the insurance payment is to debit your AP account
> $75, and credit the expense account, just as in #2.  However, the
> description field for #2 should be "Discount", and the description
> field for #3 should be "Acme Medical Insurance Company".

    P.S.  I forgot that I meant to mention an alternate (more realistic)
way to handle this.  Create an account called "Expense.Acme Medical Ins. Co=
.".
When you pay your insurance premium, this is the account to apply the debit
to.  If your employer pays your premium, check your paycheck closely, there
may be an overpayment and offset in there (for tax purposes).
    In either case, when the insurance company pays the $75, this is the
account you credit.  At the end of the year, if your balance on this
expense account is a credit balance, then you made a virtual tax-free
profit off of the insurance company, as they paid more in claims than you
paid in premiums.  If it has a debit balance, then you gave them an
interest-free loan, and you need to try and get injured more often 8-).

    BTW, speaking of paychecks, everyone here is entering their ENTIRE
paycheck into their accounting system, and not just the NET pay, right?
My paychecks have 9 journal entries!:

Account                           Comment
-------                           ---
Income.My Employer                Debit Gross Pay
Expense.Federal Income Tax        Uncle Sam's extortion money
Expense.Medicare                  Uncle Sam's extortion money
Expense.Medical                   My portion of medical insurance
Expense.Legal                     My employer offers legal advice services
Assets.Social Security            Track how much Uncle Sam owes YOU!
Assets.ESPP                       My employer offers employee stock purchase
Assets.Medical Pretax             My employer has a flex spending plan.
Assets.Cash in Checking           My Net Pay

     These should all sum to zero.

--=20
"Charlie, here comes the deuce; and when     Jack McKinney
   you speak of me, speak well."             jackmc@lorentz.com
       -Crash Davis, Bull Durham             http://www.lorentz.com
1024D/FBED2DAA 4096g/3F93879F
2002 Chicago Cubs magic number: 106

--OXfL5xGRrasGEqWY
Content-Type: application/pgp-signature
Content-Disposition: inline

-----BEGIN PGP SIGNATURE-----
Version: GnuPG v1.0.6 (GNU/Linux)
Comment: For info see http://www.gnupg.org

iEYEARECAAYFAj0XKtEACgkQVoIbWPvtLaoTYACgkOgmAF2l7459GtREs0D+NQ/p
hI4AoIJ1wKeyUstWXe5D3EMiwuISjggu
=8NzK
-----END PGP SIGNATURE-----

--OXfL5xGRrasGEqWY--