Budgeting prototype

[Rick Ziegler]

On the other hand, my mortgage payment is a significant outflow of cash,
and must be taken into account in my budget.

In addition, whenever I contribute to a non-liquid asset, like a 401k,
that is also something I want to factor into my budget.

For these asset and liability accounts, it may make sense to budget a
target account balance.

regards-

On Fri, 2003-09-05 at 17:02, phil_longstaff at comcast.net wrote:
> 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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