doing budgeting/escrow within checking account

[Andrew Sackville-West]

On Thu, Jan 03, 2008 at 08:42:49AM -0500, Mike or Penny Novack wrote:
>
>> your really close, IMO. Instead make
>>
>> Current Assets
>> 	Checking Account
>> 		 Reserve1
>> 		 Reserve2
>> 		 ...
>>
>> then you don't have to do the between account transfers. And you can
>> reconcile one account, selecting "include sub-accounts" in the
>> reconcile window. And at all times you know what you "non-reserve"
>> money is because that is what will show in the "Checking Account"
>> register. 
>>  
> Just so that you understand.

just so *you* understand, I realized after I sent the above, that it
would likely come off as "the way", and that's not what I
intended. Sorry if I offended. And I'm a firm believer in doing it the
way that works for you. THe above works for me and may not for you and
that's a-okay by me :)

>
> I intend to use for our purposes, and I described it that way (requiring 
> explicit transfers) because the apparently simpler method here would not 
> ALWAYS work. In my case, the expense item (qualifying) might NOT be a 
> transaction immediately payable by a check -- but on the business credit 
> card of the purchasing agent so a liability until paid. But when paying the 
> balance on the card, that's one check for all the items (no matter which 
> expense account they were in) and in fact, there could even be charges from 
> other cardholders on that business account.
>
> HERE (in what the person wants) you have assumed that you would ALWAYS have 
> a one-one correspondence between checks written and reserve
>accounts.

quite the contrary. I use this exact method in a savings account for
my business. In it I "escrow" all sorts of annual expenses, making
deposits on a monthly basis into the appropriate accounts to reserve
money for those expenses (some of them are pretty steep and require
planning). I also use it to escrow payroll taxes for later payment. I
routinely make a split deposit with money going into each sub-account
all in one deposit. I also make monthly reconciliation withdrawals to
account for any of these expenses that might have been paid in a
particular month. This withdrawal is also often split. 

 Why 
> did you assume that? Could be a credit card situation like described above 
> (SOME of the items on that month's statement come out of various reserves 
> but not the entire balance payment). Could also be a simpler situation. You 
> have reserve accounts for "clothing" and "household furnishings". You go to 
> a department store and buy a new winter coat and two flannel sheet sets. 
> Let's say that's $70 and $60. At the checkout, do you try to write two 
> checks for the $130 total or isn't it more usual that you give the cashier 
> one check.

nope one check, split between the two accounts. It does get a little
messy on reconciliation because the checks show up as splits, but once
you're used to it it's not bad. And, actually, although I used a
checking accoutn above, I don't do that with my checking account. And
I wouldn't as it would get very messy very fast. 

>
> Hope that explains why I described explicit transfers. Those do NOT 
> represent "real money" transactions into and out of the books but 
> accounting between abstract divisions.

I did a very poor job of pointing out the one advantage to using
sub-accounts: the parent account automatically shows the amount of
un-reserved funds without any extra effort. 

regards

A
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