Setting up a Flexible Spending Account (FSA)

[ilovemath]

After my post, I mulled over the idea of an Asset account instead of an
equity account (I also called a bean-counter friend who only knew how to
manage it from the administrator side) and I've decided to convert mine to
an Asset.  My reasoning is that a) assets and liabilities are both balance
sheet accounts, and b) that putting the entire election into a liability
should not decrease my equity.


ilovemath wrote
> ...
> Summary:
> 1. Annual election decreases Equity:FSA and increases Liabilities:FSA.
> 2. Payments for quacks and pills are entered into check register (or Cash
> in Wallet register) and the other side goes into
> Expenses:Medical:Taxable:[Category].  The parent account,
> Expenses:Medical:Taxable, is NOT a placeholder.
> 3. I create claims by going to Accounts, selecting
> Expenses:Medical:Taxable and "Open Subaccounts," then View->Filter and
> clearing the "Reconciled" box under the "Status" tab.
> 4. I record claims by reconciling Expenses:Medical:Taxable and Including
> Subaccounts, then checking off all items included in the claim.
> 5. After reconciling, I create a journal entry increasing
> Expenses:Medical:Taxable and reducing Expenses:Medical:Non-Taxable (FSA).
> 6. Reimbursement checks go into the checking account register with the
> balancing entry going into Equity:FSA.
> 7. The goal is to have Equity:FSA=0 at the end of the year and
> Expenses:Medical:Taxable=0.  If they're not, the Equity gets a journal
> entry moving the balance to Expenses:Medical:Money I've Tossed and
> Expenses:Medical:Taxable is moved to Expenses:Medical:Schedule A.
> 
> This covers every aspect I've faced, and it is effective if you have a
> run-up or grace period.
> 
> Details:
> ...
> At the beginning of the year I have a scheduled transaction to decrease my
> FSA Equity account (I actually have a subaccount for each year, but that
> wasn't one of my brightest ideas) and increase my FSA liability, and each
> paycheck reduces the liability by the deduction.  As an aside, I'm not a
> bean counter (my undergrad degree was applied math so I have no patience
> for arithmetic), but I am pretty confident that the appropriate place for
> the annual allocation is in an Equity account and not an Asset.  An asset
> is liquid or can be converted to liquid, and an FSA doesn't fall into that
> category--it doesn't have a liquid value until a claim is submitted.
> ...





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