Tracking Money in Savings Account
Anthony Dardis
adardis at gmail.com
Wed Dec 15 16:06:05 EST 2010
Right. As Derek noted, these really aren't liabilities. I only wanted to
note that you *could* think of saving for a new car as a debt owed to this
non-existent new car. But it really isn't, and so it's probably best not
to think of it that way.
On Wed, 15 Dec 2010 15:08:43 -0500, Wayne Bird <wrbird at hotmail.com> wrote:
>
> If a liability account is used in such cases, wouldn't that screw up
> your net worth report? Since this "liability" really isn't owed yet,
> your net worth is not correct. Or am I not understanding this?
>
> Wayne
>
>> To: derek at ihtfp.com; wrbird at hotmail.com
>> CC: warlord at mit.edu; gnucash-user at gnucash.org
>> Subject: Re: Tracking Money in Savings Account
>> Date: Wed, 15 Dec 2010 14:43:02 -0500
>> From: adardis at gmail.com
>>
>> You could treat these envelopes as liabilities: something you "owe" to
>> the
>> anticipated purchase, and you make the purchase by transferring funds
>> from
>> that liability to the expense account.
>>
>> (You could think of your "New Car" as a kind of credit card: every
>> month,
>> you borrow money from it and deposit it in a savings account, and then
>> when you buy the car, you spend what's in the savings account on the
>> actual car, and record it as a transaction reducing your liability.)
>>
>> I just handled a security deposit that way: when the renters gave me the
>> deposit, I recorded it as a transaction which increased the liability
>> account Liabilities:Security Deposit by way of a deposit to a savings
>> account where the money actually resides. When I returned the deposit, I
>> transferred money from the savings account to checking, then transferred
>> from checking to the liability account to indicate the actual return of
>> funds to them.
>>
>> The disadvantage of all this for the purpose of the "envelope" system is
>> that you have to make more transfers; also, at least to my mind, this is
>> conceptually kinda harder to follow, although it all makes sense, I
>> think.
>>
>> Derek may well be right that you really shouldn't think of it as a
>> liability -- as I've learned to say here, IANAA (I am not an accountant)
>> -- and the subaccount approach really is cleaner and simpler.
>>
>>
>> On Wed, 15 Dec 2010 14:12:46 -0500, Wayne Bird <wrbird at hotmail.com>
>> wrote:
>>
>> >
>> > Thanks Derek, I'll skip that suggestion!
>> >
>> >> Date: Wed, 15 Dec 2010 13:14:50 -0500
>> >> Subject: RE: Tracking Money in Savings Account
>> >> From: derek at ihtfp.com
>> >> To: wrbird at hotmail.com
>> >> CC: daniel3ub at gmail.com; warlord at mit.edu; gnucash-user at gnucash.org
>> >>
>> >> Hi,
>> >>
>> >> On Wed, December 15, 2010 1:00 pm, Wayne Bird wrote:
>> >> >
>> >> > Hello Daniel,
>> >> >
>> >> > Ah, this seems to be a bit different then what Derek was saying.
>> If I
>> >> > understood Derek correctly (the big "if"), he has two accounts for
>> the
>> >> > same item; Asset:Bank:Movies and Liability:Expense:Movies. So
>> >> > transactions would go something like this: Add paycheck to
>> >> > Income:Paycheck; transfer Income:Paycheck to Asset:Bank:Movies.
>> >> Purchase
>> >> > movie, transfer Asset:Bank:Movies to Liability:Expense:Movies
>> >>
>> >> Not quite. For one thing there's no such thing as "Add paycheck to
>> >> Income:Paycheck". The first step is purely "Transfer from
>> >> Income:Paycheck
>> >> to Assets:Bank". Also, there is no such account as
>> >> "Liability:Expense:Movies". It's purely "Expense:Movies".
>> >>
>> >> > If I understand what you're saying, there is only one account,
>> >> > Liability:Expense:Movies. So transactions would be as follows: Add
>> >> > paycheck to Income:Paycheck; transfer Income:Paycheck to
>> >> > Liability:Expense:Movies. Now when I purchase a movie what do I
>> do?
>> >> I
>> >> > can't transfer from Liability:Expense:Movies to
>> >> Liability:Expense:Movies.
>> >> > I'm sorry if am a bit dense (or a lot), please hang with me and
>> I'll
>> >> get
>> >> > it. And I've read a lot of the documentation before I started this
>> >> > thread. So I guess that proves how dense I am:(
>> >>
>> >> This is absolutely the WRONG way to do it. There is no Liability
>> here.
>> >>
>> >> > Wayne
>> >>
>> >> -derek
>> >>
>> >> > From: daniel3ub at gmail.com
>> >> > Date: Wed, 15 Dec 2010 14:43:43 -0200
>> >> > Subject: Re: Tracking Money in Savings Account
>> >> > To: wrbird at hotmail.com
>> >> > CC: warlord at mit.edu; gnucash-user at gnucash.org
>> >> >
>> >> > Hi, Wayne.
>> >> >
>> >> > Actually, you are working with Income and Expenses accounts, but
>> you
>> >> > didn´t know it :)
>> >> >
>> >> > What I´d do:
>> >> > Create a Liability account for every category you have. These will
>> be
>> >> your
>> >> > envelopes.
>> >> > In your paycheck transaction, create a split for each category you
>> >> have,
>> >> > pointing towards the corresponding Liability account.
>> >> >
>> >> >
>> >> >
>> >> > Every time you expend some money, create a transaction in the
>> >> > corresponding liability account, with the split pointing towards
>> the
>> >> > corresponding Expense account.
>> >> >
>> >> > Also, reading the docs Derek suggested is aways a good idea ;)
>> >> >
>> >> >
>> >> >
>> >> > Good Luck!=====
>> >> > Daniel Trezub
>> >> > http://www.gameblogs.com.br
>> >> >
>> >> >
>> >> >
>> >> > On 15 December 2010 14:07, Wayne Bird <wrbird at hotmail.com> wrote:
>> >> >
>> >> >
>> >> >
>> >> >
>> >> > 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.
>> >> >
>> >> >
>> >> >
>> >> >
>> >> >
>> >> > 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.
>> >> >
>> >> >
>> >> >
>> >> >
>> >> >
>> >> > 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.
>> >> >
>> >> >
>> >> >
>> >> > Wayne
>> >> >
>> >> >
>> >> >
>> >> >
>> >> >
>> >> >> 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
>> >> >
>> >> >
>> >> >
>> >> > _______________________________________________
>> >> >
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>> >> >
>> >> > gnucash-user at gnucash.org
>> >> >
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>> >> >
>> >> >
>> >> >
>> >>
>> >
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