Tracking Money in Savings Account

[Wayne Bird]

Michael,

> Bookkeeping is about ACTUAL transactions, not transactions that might or 
> might not occur. For projected transactions (planning) we use a "budget".

So, it sounds like you do not create subaccounts for future transactions (i.e. saving for a car), but use a budget.  I haven't used the budget feature in GnuCash, does it work well?

Wayne


> Date: Fri, 17 Dec 2010 11:37:30 -0500
> From: stepbystepfarm at mtdata.com
> To: brakhane at googlemail.com
> CC: wrbird at hotmail.com; warlord at mit.edu; derek at ihtfp.com; gnucash-user at gnucash.org
> Subject: Re: Tracking Money in Savings Account
> 
> 
> >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).
> >
> I think that's the issue here. That people don't understand why the 
> normal bookkeeping method is the second.
> 
> In the interim you have the cash (in your checking account) and a 
> liability for taxes to be paid by some future date. Will you pay them by 
> check (the reason why you seem to think "less money in the checking 
> account than the bank thinks" or some other way. For example, suppose 
> you have "pre tax money available" but can't touch any of that without 
> paying a penalty tax till you reach a certain age. So maybe you don't 
> (in effect) take the money directly from your checking account but by a 
> short term loan (trading liability for liability) that you pay off when 
> that critical date has passed.
> 
> Bookkeeping is about ACTUAL transactions, not transactions that might or 
> might not occur. For projected transactions (planning) we use a "budget".
> 
> Michael