gnucash-user Digest, Vol 117, Issue 8

[Matt Braunstein]

I am in the same boat with respect to setting up and sticking to a budget. The method I use is sort of an envelope style method. It's is pretty manual, and probably anything but standard. However, I find that the extra effort helps me a lot in determining where I stand with my budget throughout the month. If you don't want to put in more effort in your bookkeeping, then this probably isn't for you.

I have a checking account that is my parent account. I setup subaccounts for every category in my budget. I deposit the money into the appropriate subaccount. This allows me to see exactly how much money remains within each category directly from the account list. I can also run a report to see what my spending was in each category, no matter how I decide to account for the money with the associated expense accounts. I enter all my transactions under the parent checking account and keep a blank line within a split transaction listing the parent account. This keeps all the transactions listed under the parent checking account register.

Another piece of advice on budgeting that I haven't really heard anywhere. Not only should you budget your monthly income, but also each paycheck, so that you know what categories that check will cover. Also, I live in Texas too. I started keeping track of sales tax and found that the standard deduction was probably better than what I would've deducted had I kept track of it. It may not be worth the effort to keep track to that detail.

Matt

> ---------- Forwarded message ----------
> From: Phil Davis <phil at coolbluedesigns.com>
> To: gnucash-user at gnucash.org
> Cc:
> Date: Sat, 8 Dec 2012 22:08:19 -0600
> Subject: Sales Taxes & Budget
> Hello everyone,
>
> I am new to GnuCash, so thanks to everyone that has created this program.
> It seems to be exactly what I need.
>
>
> So, I am trying to figure out how I can do something, that seems a little
> unorthodox:
>
>     I need to keep track of both budget items and sales taxes.
>
> So, let me explain:
>
> First, I need to create and stick to a budget.  You know, a typical budget
> for household items, groceries, mortgage, etc... the normal items that
> people typically create a budget for.
>
> Second, since I live in Texas, we do not have Income Tax.  Since the
> Federal Government allows me to deduct Sales Tax on Schedule A, I need to
> keep track of my sales tax.
>
> The conflict arises in the fact that I don't want a budget for sales tax...
> I create a budget for clothing or groceries or whatever, I don't have set a
> plan to spend $15 in taxes this week... I have a plan to spend $50 on
> clothing, but the government takes some of my money (tax), so I really only
> have 45.45 to spend on clothes (45.45 + 10% sales tax (4.55) = 50.00
> (assuming 10% sales tax, in reality, it is 8.25% most places, occasionally
> only 6.25% depending on the location).  However, I still want to budget 50
> for clothing and then indicate that I spent $50 in clothing of which 4.55
> was sales tax.
>
> The closest I can think of is to create a sub-account for sales tax for
> each expense account, but that would be painful to set up and very painful
> to create a report (or so I think at this point... remember I am new to
> GnuCash)
>
> Alternatively, I can create an account for sales tax, and then only budget
> 45.45 in clothing... but I really don't want to keep track of it that
> way.... what if I find a deal where my sales tax is only 6.25% (instead of
> 8.25%)?  That means I have a little extra to spend.
>
> What I really want is to indicate 50 was spent on clothing, 4.55 of that 50
> was attributed to sales tax. Then, I could check my actual expenses vs the
> budget and keep track of the sales tax so I can report that on my taxes.
>
> Is there any way to do this? or is there a better way?
>
> Thanks,
>
> Phil
>

Set up one expense account for sales taxes with two sub-accounts:
1. Sales taxes actual spent
2. Sales taxes actual spent-contra

The second one, the contra account is called that because it will
exactly offset the first subaccount so that the net balance of the
parent account will always be zero. (In accounting terms, it's called
a contra-expense account because it is expected to have a credit (that
is, negative) balance, normally.)

Then in every purchase transaction, enter a split transaction as
follows, using your numbers:

Debit: Clothing expense              $50.00       (increase expense)
Debit: Sales taxes actual spent       4.55       (increase expense)
  Credit: Checking Account                            $50.00      (or
credit card or whatever you used to pay with; decrease asset or
increase liability)
  Credit: Sales taxes actual spent-contra          4.55       (decrease expense)

The clothing expense account amounts will be grossed up and compare to
your budget amounts. The cumulative amount in the Sales taxes actual
spent sub-account will be the actual amount spent on sales taxes with
all the detail of the individual expenditures if you need an audit
trail to support your deduction available in the account. The net
effect of the two sales taxes subaccounts will be zero, so no double
counting in total.

Alex
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