Accounting for Section 125 Cefeteria plans (US)

Derek Atkins warlord at MIT.EDU
Tue Dec 13 12:38:50 EST 2005

IANAA but how I would set this up:


At the beginning of the year, xfer $1000 from L:F -> A:F
Then at every pay period, split your FLEX deduction into L:F from your
normal Income:Salary account.
When you USE your flex money, use it from A:F -> Expense:Medical:whatever.

The difference between the Asset and the Liability is how much you lost
or owe.

You could probably do it as contra accounts instead, if you prefer:

     +--To Spend (Asset)
     +--To Deduct (Liability)

Same rules as above.


Quoting Tim Wunder <tim at>:

> My company will be instituting a Section 125 Cafeteria plan (flexible 
> spending
> account) for medical expenses. Starting January 1, 2006, my flexible spending
> account will have $1000 available to it. Each payday (weekly), a specific
> amount of money (1000/<53 or 52>) will be deducted from my pay pre-tax and be
> designated for the flexible spending account. So, at the start I will only
> have a small amount actually deducted from my income assigned to the flex
> account, the full $1000 will be available for me to use for medical expenses.
> How should I configure gnucash (1.8.11) to account for this?
> I'm thinking I should at least set up an asset account for the $1000. That's
> the easy part. The hard part (for me) is determining what account that $1000
> comes from, and what account the weekly deductions should be updating.
> My current thinking is that I should set up an Income account, Income:Flex
> from which a transfer of $1000 will be made to credit the Income:Flex account
> and debit the Assets:Flex account on January 1 (when the money will become
> available for use). Each week I'll add a split to my payday transaction that
> currently credits Income:Salary the amount of the specific pre-tax payroll
> deduction as a debit to Income:Flex the amount (along with other debits to
> Assets:Checking, Expenses:Tax, etc...).
> Is that right?
> Seems like it to me, but I'd like to throw it out there so (perhaps) someone
> who might actually know how it's s'posed to be done.
> Thanks,
> Tim
> --
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       Derek Atkins, SB '93 MIT EE, SM '95 MIT Media Laboratory
       Member, MIT Student Information Processing Board  (SIPB)
       URL:    PP-ASEL-IA     N1NWH
       warlord at MIT.EDU                        PGP key available

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