401K and Employer Contribution Part 2

[T. Cabugao]

Mark Eackloff wrote:
> I agree with the idea of two accounts only if you want to recognized the 
> unvested part as having been "realized."  But I wouldn't bypass the P&L 
> accounts to get it into Equity.  You worked for it and the IRS will 
> treat it as earned income (when you eventually draw from your account).  
> It did not just drop out of the sky.
> 
> If you want to follow a practice that resembles GAAP (Generally Accepted 
> Accounting Principles), you don't record the unvested part.  It doesn't 
> belong on the balance sheet (or on the income statement) because it 
> hasn't happended yet and you havn't completed your performance with 
> respect to earning that money.  But record it as revenue when it becomes 
> vested.  You should get statements from the fund custodian at least once 
> a year showing both you vested and unvested amounts.  I probably 
> wouldn't bother updating you "books" more often than once per year.
> 
> Mark Eackloff, CPA
> (at least I'm a CPA in Maryland)
> 
> Derek Atkins wrote:
> 
>> unfortunately gnucash does not keep track of vesting rights, so there
>> is no way to really do it.  I suppose you could have two Equity
>> accounts, one for the fully-vested and one for the will-vest-over-time
>> inclusions.  But there's no way to keep track of the fact that some of
>> your matching contributions are vested and some are not (assuming the
>> contributions vest at different times).

Well, after thinking through Derek, Mark, and Dale's (emailed to me... 
forwarded to list) suggestions, I decided that the best solution for me 
is to combine all of their ideas.

Here is a snapshot of the chart of accounts:

Assets
	401K Provider
			Vested	Fund1
				Fund2
				
			Unvested Fund1
				Fund2

Income
	Vested Employer Matching

Equity
	Unvested Employer Contrib


Reasonings:
1.) Unvested employer contributions were accounted for in the asset 
account because it would bother me to see such a big difference between 
my 401k provider's statements and my gnucash balance if I did not 
account for it. I wanted a quick way to detemine how much of the 
statement balance is vested, and unvested. Secondly, I know it is 
against GAAP to account for unearned assets, but I decided this could be 
something like "Intangible Assets" in the corporate world. *wink, wink* 
Lastly, this could come in handy when weighing opportunity costs of 
changing employment versus sticking around before vesting.

2.) Vested Employer Matching were added under Income accounts, because 
as Mark pointed out, it is earned. I don't mind it being in the P&L 
report. This account was also marked as Tax-Related. (Maybe because it's 
late, but I can't for the life of me find the Tax Form in Tax Options 
that I can match with the employer contribution. Anybody have an idea?)

3.) Unvested Employer Contrib was placed under Equity, as Derek 
suggested, so it does not show up in the P&L report.

Upon vesting,as Dale suggested, transactions in Equity:Unvested Employer 
Contrib can be moved to Income:Vested Employer Matching. The vested and 
unvested asset accounts can then be combined.

Or, if my "intangible assets" were not enough for my employer to keep me 
before vesting, I should be able to delete the Equity account and the 
Unvested asset accounts. It would be like they were never there.

If anybody have any suggestions, please feel free to speak up. If I had 
just concocted a recipe for accounting disaster, let me know.

Thanks for the suggestions guys... And thanks to the developers for such 
an excellent program!

Tyrone Cabugao