"Double Dating" transactions?

[Aaron Gaudio]

On Wed, 2004-09-01 at 22:39 -0700, David Harrison wrote:

> This sounds like your talking about income tax deducted from your paycheque. 
> If this is the case, I would still accumulate the monthly payments in the 
> income tax payable account the same as in the example I posted earlier.  The 
> payable account is really a receivable, but it's one of those accounts that 
> can "flip" back and forth on the balance sheet..

I disagree here. An Accounts Payable is a liability account representing
money that you have but which you owe. When you pay a tax withdrawal
from your paycheck, it is not money you have- the IRS has it.
Furthermore, that withdrawal will include Social Security, Medicare,
State and Federal taxes, all which should go to seperate tax expense
accounts (not payable accounts). Amounts you overpay should go to an
Accounts Receivable, since this represents money which you don't have
but which is owed to you. I'm not sure the accountant way to correctly
retroactively calculate each payment's portion that goes to the Accounts
Receivable (e.g. can you just divide your refund evenly across the
months? this is probably not bad, but not completely accurate if the
withdrawal amounts change due to increased income or changes to tax law
in the middle of the year). 

> 
> If you are posting to the expense account to reflect the cash outflow, you 
> are treating the income statement as more of a cash flow statement.

I don't understand this. Are you saying he should not transfer his taxes
paid to a tax expense account? That's not right- he should transfer the
taxes paid from his income to his tax expense accounts (or from income
to accounts payable *IF* taxes are not withdrawn from your paycheck-
e.g. you're self-employed and have to submit quarterly tax payments).

> My entries would cause the expense to be recorded in 2003, and the refund 
> being recorded in 2004.  The balances would be as follows
> 
> Dec 31, 2003
> Bank would show $1,000.00 paid
> Income taxes payable $ 100.00 (debit balance) - technically a receivable

This should be in an "Accounts Receivable" type account. But it's not
"income taxes payable" (payable means you owe the money), it's "income
tax refund" (or "receivable"- meaning they owe you).

> Income tax expense    $ 900.00 (debit balance)

And this should be an "Expense" type account. If you don't pay your tax
to the gov't immediately, then you should have a seperate "Income Taxes
Owed" (or "Payable") account of type "Account Payable" which would be a
liability.

> 
> May 15, 2004
> Bank would show $100.00 received
> Income taxes payable $ 0.00

Important to note that you would transfer the $100 from the
(inappropriately named) "Income taxes payable" account, as soon as your
refund check is deposited into your account.

> Income tax expense    $ 0.00 (as the balance would have closed to retained 
> earnings)

This is wrong- you wouldn't want to empty your expense account. You've
still paid your taxes from the previous year, and since gnucash shows
the lifetime amount, I would expect to still see $900 (plus any prior
years' expenses); unless you have closed your books and started a new
registry, which gnucash does not support yet.

-- 
Aaron Gaudio <prothonotar at tarnation.dyndns.org>