Tracking Money in Savings Account
Wayne Bird
wrbird at hotmail.com
Wed Dec 15 16:28:31 EST 2010
Thanks everyone for these discussions. It's really helping me get a grasp on these principles. I'm looking forward to implementing these when I get home.
> 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 16:06:05 -0500
> From: adardis at gmail.com
>
> 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
> >> >> >
> >> >> >
> >> >> >
> >> >> > _______________________________________________
> >> >> >
> >> >> > gnucash-user mailing list
> >> >> >
> >> >> > gnucash-user at gnucash.org
> >> >> >
> >> >> > https://lists.gnucash.org/mailman/listinfo/gnucash-user
> >> >> >
> >> >> > -----
> >> >> >
> >> >> > Please remember to CC this list on all your replies.
> >> >> >
> >> >> > You can do this by using Reply-To-List or Reply-All.
> >> >> >
> >> >> >
> >> >> >
> >> >>
> >> >
> >> > _______________________________________________
> >> > gnucash-user mailing list
> >> > gnucash-user at gnucash.org
> >> > https://lists.gnucash.org/mailman/listinfo/gnucash-user
> >> > -----
> >> > Please remember to CC this list on all your replies.
> >> > You can do this by using Reply-To-List or Reply-All.
> >
More information about the gnucash-user
mailing list