Budgeting prototype
phil_longstaff at comcast.net
phil_longstaff at comcast.net
Fri Sep 5 22:02:43 CDT 2003
I agree. This is why you would tie your budget to income and expense accounts,
not assets and liabilities.
Phil
> I'm not convinced of this. When I budget "$250 for food" I
> don't really care whether it's being paid for by cash, check,
> credit card... All I care amount is that I'm spending $250
> on food.
>
> -derek
>
> Dale Alspach <alspach at math.okstate.edu> writes:
>
> > Incrementing a liability or asset account as it appears bothers me.
> >
> > >Actually, the $200 budgeted for the credit card in this example is not for
> > >a single bill but rather the amount that this account should change over
> > >the designated period (monthly in this case). The intent is to show that at
> > >the end of the month I want my credit card balance to go down by $200.00.
> >
> > >Say I started out with $1000.00 balance on my visa. In my budget I want to
> > >show that each month I am going to decrease that amount by $200.00 It may
> > >be that I spend $100.00 for a (posh) dinner out and use my visa to
> > >pay for it but I would expect to pay that bill at the end of the month
> > >and tack on $200.00 to decrease the outstanding balance and meet my budget.
> >
> > It seems to me that a budget has to have some double entry consistency.
> > That $200 has to come from somewhere: income, asset conversion or
> > borrowing. If the budget is going to make sense from a liability, asset,
> > equity point of view, I should be able to dump in my financial position at the
> > beginning of the budget period and then run a balance sheet for six months
> > into the budget year to get my expected position. That balance sheet is
> worthless if I am able to
> > create or destroy assets and liabilities out of nothing.
> >
> > To make this work the budget system has to either require offsetting
> > entries for adjustments to assets and liabilities or there will need to be
> some
> > automatically created "slop" entries. Looking at the January column in the
> > prototype shows the inconsistency.
> >
> > 100 is being added to a savings account, 200 is being used to pay down a
> > debt, 200 goes for rent, 200 for food, and another 100 is is being added
> > to assets for a holiday. It looks to me like 800 has been allocated so the
> > total ( net )
> > should be 1200 if the total means unallocated income. The real problem is
> > that the bottom summary does not make sense once liability and asset
> > adjustment is in the budget. As listed only two entries were actually
> > expenses, rent and food, so expenses should have been 400, dreaming (slop)
> 400,
> > income 2000.
> >
> > Perhaps someone with more accounting experience/knowledge could comment on
> > this.
> >
> > Dale Alspach
> >
> >
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>
> --
> Derek Atkins, SB '93 MIT EE, SM '95 MIT Media Laboratory
> Member, MIT Student Information Processing Board (SIPB)
> URL: http://web.mit.edu/warlord/ PP-ASEL-IA N1NWH
> warlord at MIT.EDU PGP key available
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