Tracking Money in Savings Account

Dennis Brakhane brakhane at googlemail.com
Thu Dec 16 19:37:28 EST 2010


Reading my mail again, I think my point did not
come across quite right, so I try again:

On Fri, Dec 17, 2010 at 1:23 AM, Dennis Brakhane
<brakhane at googlemail.com> wrote:
> I'd use envelopes only for things you really save up for. Costs that
> you know you must pay,
> like taxes or insurance. This is money you don't have available, as
> you know you have to pay it. For
> these, it makes sense to put them into subaccounts/envelopes, because
> that money is not
> available to you for spending.

The important bit which I omitted is "you must pay some time in the future".
For example, suppose your employer would not automatically substract
your income tax for you and you would have to pay it yourself.

Case 1: you must pay the income tax in the same month.
No need for a tax savings account here, you just write a check
for $tax and book it as a transfer from Savings -> E:Income Tax

Case 2: you must pay the income tax in 6 month time.
Instead of writing a check right away, you decide to
get some interest for the money instead and keep it
on your savings account. However, you know you have
to pay $tax in 6 months time, so you transfer the money to
your "income tax" envelope. This way, while your bank statement
still shows the full amount, your GC bank account only shows the
amount of money you really have.

(Another way to handle case 2 - and probably more correct in
 pure bookkeeping terms - would be to make a transfer from
 Expenses:Income Tax to Liabilities:Income Tax and in 6 months
 time, write a check for the tax office and book it as a transfer from
 your normal Savings account to Liabilites:Income Tax)


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