How would you handle this situation?

Liz edodd at billiau.net
Mon Oct 24 21:13:36 EDT 2011


On Thu, 20 Oct 2011 11:46:20 +0100
David Ryder <dnryder at btinternet.com> wrote:

> Hi,
> I have something I just can't get my head around.
> 
> Situation:
> 1. I have two sets of books: one for my UK bank accounts and another
> for my overseas bank accounts. They have to be separate.
> 
> 2. I have received an amount of, say, £10,000.00 to use for my
> father's care and the balance repayable to his estate. Asset or
> Liability?
> 
> 3. Any amount used for him must be recorded - no problem there, it's
> an expense.
> 
> 4. Because my personal capital is overseas, to avoid foreign exchange
> I can use some of the GBP money. But, each amount I use for myself
> must be recorded thus:
> a) There must be an entry in the GBP account recording that I spent
> £x. This must be 'transferred' into an account, e.g. an account like
> 'Spent by David'. What sort of account would this be? Expense,
> liability or equity (equity as it is a debt in effect?)
> 
> b) An equivalent amount in one of my overseas accounts must be 
> transferred into one of my overseas Savings Accounts at the then 
> exchange rate. No problem there.
> 
> 5. PROBLEM: If I use an amount, it comes out of the account with a 
> corresponding entry in 4a.
> 
> By 'transferring' that amount again to an 'I owe Dad' account, the
> same amount is being paid twice. Once when I spend it, second when I 
> 'transfer' it to 'I owe Dad'.
> 
> Can anybody help?
> 
> David

I think that I would record the moneys for your parent in a separate
set of books altogether, as this money is in trust.
This money may then be within an existing bank account.
Your problem (5) is because one of the accounts is wrongly signed (the
credits and debits are reversed). For one of these accounts you have
therefore selected either asset or liability wrongly.
In the set of accounts for the money in trust, the balance is an asset.
In the set of accounts of yours which cover the bank account holding the
actual funds, the money is a liability.



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