Transfers Between Checking and Savings

[Michael Hendry]

On 15 Mar 2013, at 14:24, Mark Phillips <mark at phillipsmarketing.biz> wrote:

> I make periodic transfers from savings to checking. However, I just make
> the transfers as deposit in checking and withdrawal from savings. When I
> run an income/expense report, those transfers do not show up, obviously.
> So, I created an income account called Transfers from Savings, and whenever
> I transfer money I deposit in the checking account and credit the income
> account. But what is the corresponding transaction in the savings
> account? Or, is there a better way to do this?
> 
> The reason I want to do this is that I am managing my elderly parents
> accounts, and the other siblings want to see detailed financial reports.
> Since my parents are living off their savings and a few other income
> sources, I want to show the transfers from savings as income for them. Is
> there a better way to do this?
> 
> Also, once I figure out how to show the transfers as income, (unless there
> is an accounting reason not to do this!), how do I change the reconciled
> transactions that go straight from savings to checking without the
> intermediate income accounts?
> 
> Thanks,
> 
> Mark

As an elderly parent myself, I have a similar problem to solve.

Some years ago, my wife and I invested some of our savings in a Loan Trust, with our children as beneficiaries.

We take a regular monthly sum from this trust fund, calculated to return our "loan" over a twenty year period, without interest. Any interest generated by the fund is reinvested, and in practice it is keeping the value of the fund level. Assuming we survive the twenty years, we'll have recovered the loan we made to the trust, and the money remaining in the trust will be outside our estates for Inheritance Tax purposes.

I have treated this fund as a Current Asset, receiving its opening balance from the Opening Balances Account.

When the monthly payment of £x comes into my current account, I deal with it as a split transaction, taking £x from the Loan Trust account (Current Asset) into my current bank account, but at the same time taking £x from Opening Balances and transferring it into an Income Account which I've called "Pseudo Income".

As we're treating this regular transfer of cash into our current bank account as part of our monthly income, this makes sense for budgeting, but I suspect it doesn't follow standard book-keeping practice!

You obviously want to distinguish between income (which is subject to income tax) and expenditure from savings (which isn't), which is why I've called it "Pseudo Income".

Michael