Tracking Money in Savings Account

Derek Atkins warlord at MIT.EDU
Wed Dec 15 11:27:12 EST 2010


Hi,

Wayne Bird <wrbird at hotmail.com> writes:

> Thanks Derek for your reply!
>
> Yes, define "standard accounting method" -- good question:)  Granted, everyone
> has their own way of doing things, however it appears the most common method
> is tracking assets, income, expense, etc. where income is viewed separately
> from expenses.  For example, my paycheck would just go into an income account
> and that's it.  Then I would track all my expenses through various expense
> accounts.  On the other hand,  I have always used the envelope system,
> divvying out my paycheck into these various categories.  So these categories
> (or accounts) can be seen as both income (because I'm splitting my paycheck/
> income into these categories) and expense (because I'm purchasing items from
> these categories).  This is what makes the most sense to my little brain:) and
> that's why I'm having difficulty with "standard" accounting methods because
> they have to be separate. 

Ah, see, you're missing the whole basis of double-entry accounting.
When you get a paycheck it does not "just go into an income account".
Your paycheck is a transaction from Income (Salary) -> Asset (Bank).
Technically it would be a Split transaction from Income into a set of
Expense accounts (for Tax Withholdings) and your Asset (Bank) account.

If you don't understand what I mean by this, I recommend you stop what
you're doing right now and read the Concepts & Tutorial to get a basis
for double-entry accounting.  You can also read the chapter on Paycheck
Splits for more details on this.

Anyways, once you make the transfer into your bank account, from there
you can use the envelope method to keep track of how much of your Bank
account is allocated towards future expenses.  So let's say you get paid
$1000 (post tax).  That $1000 would be a debit into your Bank account.
Then you can split that $1000 into your envelopes.  So let's say you
save $100 into Bank:New Car, $100 into Bank:TV, and $50 into
Bank:Movies.  That could be done with a single Split that would credit
bank and debit the subaccounts.

Then when you buy that TV, instead of making a transfer from Bank ->
Expenses:TV, you would make a transfer from Bank:TV -> Expenses:TV.

> I'm sure I'm making this more difficult than it should be, so if you please
> continue to with me I'll use the suggestion of subaccounts that each of you
> made and go from there.  I haven't had a chance yet to look into this, but I
> will soon.  So as Derek, as John Mason stated, is your checking account just a
> placeholder for all the subaccounts?  What John stated made sense to me and
> this is what I'll try first.

No need to make the Checking account a placeholder.  You could keep
miscellaneous funds in there.

> Again, thanks all of you for holding my hand through this!!  I greatly
> appreciate your help.  As I continue down this road I'm sure I'll have more
> questions.

Again, I HIGHLY recommend you read the docs if you haven't already!
Seriously, spend a day reading it before you continue.

Good Luck,

> Wayne

-derek

>> From: warlord at MIT.EDU
>> To: wrbird at hotmail.com
>> CC: adardis at gmail.com; jmason at masondrywall.com; gnucash-user at gnucash.org
>> Subject: Re: Tracking Money in Savings Account
>> Date: Wed, 15 Dec 2010 10:09:24 -0500
>>
>> Wayne Bird <wrbird at hotmail.com> writes:
>>
>> > Thanks so much for your help! I will continue to play around, and I'm sure
> I'll be back with more questions.
>> >
>> > Though I used the envelope system in the past, it seems that's not the
>> > standard accounting method. I tweaked MSMoney for years in order to
>> > make it "act" like an envelope system and I don't want to tweak
>> > GnuCash to do this, I'd rather just learn how GnuCash is designed to
>> > be used and use it accordingly.
>>
>> Define "standard accounting method"? It's certainly one way that many
>> people do it. GnuCash doesn't need to be tweaked to do this. In fact
>> it's somewhat designed to support this! See, for example, the "Open
>> Subaccounts" option on the reconcile dialog. This lets you reconcile
>> a Bank Account with subaccounts.
>>
>> You can also look at the Budget features of GnuCash, but I've never used
>> them myself so I cannot comment on them.
>>
>> > Please remember to CC this list on all your replies.
>> > You can do this by using Reply-To-List or Reply-All.
>>
>> -derek
>>
>> --
>> 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
>

-- 
       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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