Budgeting prototype
Derek Atkins
warlord at MIT.EDU
Sun Sep 7 18:12:31 CDT 2003
I think what we're really saying here is that we're talking about
budgeting the _delta_ within a budget period. For example, if I
budget $250 for food, what I'm really saying is that "the sum of all
'food' accounts would increase by $250 over the budget period".
Similarly, if I budget $1250 for my mortgage, what I'm really saying
is that "the sum of my mortgage liability, tax-expense, and escrow
accounts are going to change by $1250 over that period".
So, I see no reason to really look at Income/Expense and
Asset/Liability accounts any differently if you consider budgeting in
the form of deltas (change over time).
Is this an accurate summary?
-derek
Rick Ziegler <rick at zieglernet.org> writes:
> 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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> > > > gnucash-user at lists.gnucash.org
> > > > https://lists.gnucash.org/mailman/listinfo/gnucash-user
> > >
> > > --
> > > 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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>
--
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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