Entering RRSP Transaction in GnuCash

Sun Apr 12 18:56:30 EDT 2015

If they arrived in Assets, they had to come from somewhere (double entry
accounting). The rule of thumb I use is that equity is for something that
you always had, at least since you started using GnuCash, so I think equity
is not the right place for the other leg of the transaction. It would
definitely not be good accounting practice to use equity in this case, as
far as I know. As for the other options, you are not moving the asset from
another asset account; you are not receiving a rebate on an expense you
already made; you are not incurring a liability (you didn't borrow money
for the contribution). That leaves income.

There tends to be some confusion about the way the word "income" is used.
The confusion is resolved if you separate taxable income from non-taxable
income. The RRSP contributions may not be "income" in the sense of Revenue
Canada income, so the right place to take the income from is a non-taxable
income account.

However, the question you should really be asking is not what the
transactions really mean, but, "How must these transactions appear on my
income tax filing?" I don't know the answer to that question, but you or
your accountant would, and perhaps others on this list could provide some
guidance. The answer to that question determines the accounting treatment
you should be using. So for example, It may be that Revenue Canada wants to
see all the contributions as regular income, and then the deposits to the
RRSP account as deductions, in which case each transaction would then have
four legs:

DR: Assets:Investments:EmployerRRSPContrib $100
CR: Assets:ImaginaryHoldingAcctManagedByEmployer $100
DR: Assets:ImaginaryHoldingAcctManagedByEmployer $100
CR: Income:Taxable

Then at the end of the fiscal year you look at all the transactions for the
year in Income:Taxable and see the number you should report to Revenue
Canada as your taxable income, and you look at all the transactions for the
year to Assets:Investments:EmployerRRSPContrib and see (part of) the
deduction for RRSP contributions.

On the other hand, if Revenue Canada doesn't count your employer RRSP
contributions as taxable income offset by deductions, then you should use
the method I first suggested. On second thought, what I first suggested is
probably wrong, because there are annual limits to RRSP contribution, and I
think employer contributions count toward that annual limit. So the
contributions should count in your deductions on your tax filing, which
means they should also count as income.

I do something similar with my pension plan, only in my case the holding
account is not imaginary; my employer makes pension contributions to that
account twice a month, and they are only forwarded to the pension plan once
a month. So in my case the transfer from the holding account to the pension
plan occurs at a different time from the deposits to the holding account,
so I can't bundle all the legs together into one transaction. I use three
transactions.

On 12 April 2015 at 09:29, jfjunior <jfjunior at jfjunior.ca> wrote:

> I see what  you are saying, however here is where I've a problem.
>
> The deposit made by my employer to my RRSP account is not part of my
> paycheque, is a direct transaction from my employer to my RRSP account. So
> for me to see these individual transactions - which are in company shares
> by the way - I need to logon to my SunLife account or wait for my
> investment quarterly e-statements.
>
> The only transaction which shows up on my paycheque is my own contribution
> to my RRSP account - EmployeeRRSPContrib -  as that one is deducted from my
> paycheque.
>
> Would it be a good accounting practice to setup these transactions as
> "equity - open account balances" or "equity - retained earnings"? How would
> that affect my reporting?
>
> My main concern here is that these deposits are showing up as "income" and
> they are not income yet, just assets for the time being.
>
> i.e.
>
> DR: Assets:Investments:EmployerRRSPContrib - $100.00
> CR: Equity:Opening Balances - $100.00
>
> or
>
> DR: Assets:Investments:EmployerRRSPContrib - $100.00
> CR: Equity:Retained Earnings - $100.00
>
> Thanks
>
> On 12 April 2015 at 02:41, Edward Doolittle <edward.doolittle at gmail.com>
> wrote:
>
>> From Income:MyName:Non-taxable:RRSP-employer, or something similar. Then
>> you should use that same account in the income side of your paycheque split.
>>
>> On 11 April 2015 at 23:42, jfjunior <jfjunior at jfjunior.ca> wrote:
>>
>>> Thanks Edward,
>>>
>>> Breaking the gross income in taxable and non-taxable is a good idea. Now
>>> from the $1200.00, $1000.00 is what I get net in my account, and the sample
>>> of 2 x $100.00 entries are taxes, etc. I have about 7 deductions
>>> (insurance, cpp, ei, charitable donations etc...which I didn't list).
>>>
>>> Any idea how I should proceed with the first transaction, when my
>>> employer makes a deposit to my RRSP account directly? :)
>>>
>>> DR: Assets:Investments:EmployerRRSPContrib - $100.00
>>> CR: Income:MyName:RRSP - $100.00
>>>
>>> Thanks again.
>>>
>>> Jay
>>>
>>>
>>> On 12 April 2015 at 01:19, Edward Doolittle <edward.doolittle at gmail.com>
>>> wrote:
>>>
>>>> In the last transaction, you should break your gross income into two
>>>> parts: taxable ($1200) and non-taxable ($500, corresponding to RRSP
>>>> contribution). Furthermore, maybe not everything in the $1200 is taxable.
>>>> Paycheques typically have multi-way splits where both the credits and
>>>> debits are split.
>>>>
>>>> On 11 April 2015 at 14:34, jfjunior <jfjunior at jfjunior.ca> wrote:
>>>>
>>>>> Hi everyone,
>>>>>
>>>>> I've edited my original post for more clarity.
>>>>>
>>>>> I'm wondering if someone can help me with a question about the proper
>>>>> way to
>>>>> register a transaction where my employer makes a direct contribution
>>>>> to my
>>>>> RRSP account.
>>>>>
>>>>> RRSP is more or less the Canadian equivalent of the USA 401(k) and as
>>>>> such
>>>>> is a Retirement Fund. Basically my employer makes a biweekly
>>>>> contribution to
>>>>> my RRSP account. For now I'm registering these transactions as an
>>>>> Income,
>>>>> however this is not correct because RRSP contributions will only be
>>>>> considered  income when I have access to the funds, at which time I
>>>>> will pay
>>>>> Income Tax on the value I withdrawal from my account.
>>>>>
>>>>> This is the way I'm entering my employer RRSP contributions to my RRSP
>>>>> account in GnuCash, which I think is wrong:
>>>>>
>>>>> DR: Assets:Investments:EmployerRRSPContrib - $100.00
>>>>> CR: Income:MyName:RRSP - $100.00
>>>>>
>>>>> Now if I make, for sake of argument,  a withdrawal of $500.00, I will
>>>>> enter
>>>>> the transaction in GnuCash as as DR to EmployerRRSPContrib or
>>>>> EmployeeRRSPContrib - depending from which account I'm making the
>>>>> withdrawal
>>>>> from (my own contributions or my employer contributions).
>>>>>
>>>>> The example below assumes the withdrawal is from my Employer's RRSP
>>>>> Contribution account. Note that I'm paying 10% Income Tax on the total
>>>>> value
>>>>> of the withdrawal.
>>>>>
>>>>> DR: Expenses:Taxes:Income Tax Investments - $50.00
>>>>> DR: Assets:Current Assets:ChequingAccount - $450.00
>>>>> CR: Assets:Investments:EmployerRRSPContrib -                $500.00
>>>>>
>>>>> I also make RRSP contributions directly from my paycheque, which I
>>>>> register
>>>>> in GnuCash this way:
>>>>>
>>>>> DR: Assets:Current Assets:ChequingAccount:          $1000.00
>>>>> DR: Taxes and Deductions:Expense01                      $100.00
>>>>> DR: Taxes and Deductions:Expense02                      $100.00
>>>>> DR: Assets:Investments:EmployeeRRSPContrib:         $500.00
>>>>> CR: Income:Salary:MySelf (Gross Income)
>>>>> $1700.00
>>>>>
>>>>> So the issue here is that the first transaction if fundamentally
>>>>> incorrect
>>>>> as I cannot consider the RRSP contribution from my employer as an
>>>>> income
>>>>> yet, since I've not accessed the funds and paid income taxes on it.
>>>>>
>>>>> I would appreciate any input, so I can get this right.
>>>>>
>>>>> Thank you very much everyone!
>>>>>
>>>>>
>>>>>
>>>>> --
>>>>> View this message in context:
>>>>> http://gnucash.1415818.n4.nabble.com/Entering-RRSP-Transaction-in-GnuCash-tp4677764.html
>>>>> Sent from the GnuCash - User mailing list archive at Nabble.com.
>>>>> _______________________________________________
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>>>>> gnucash-user at gnucash.org
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>>>>>
>>>>
>>>>
>>>>
>>>> --
>>>> Edward Doolittle
>>>> Associate Professor of Mathematics
>>>> First Nations University of Canada
>>>> 1 First Nations Way, Regina SK S4S 7K2
>>>>
>>>> « Toutes les fois que je donne une place vacante, je fais cent
>>>> mécontents et un ingrat. »
>>>> -- Louis XIV, dans Voltaire, Le Siècle de Louis XIV, Chap. XXVI
>>>>
>>>
>>>
>>>
>>> --
>>> Simplicity is the ultimate sophistication.
>>>
>>>
>>>
>>>
>>
>>
>> --
>> Edward Doolittle
>> Associate Professor of Mathematics
>> First Nations University of Canada
>> 1 First Nations Way, Regina SK S4S 7K2
>>
>> « Toutes les fois que je donne une place vacante, je fais cent mécontents
>> et un ingrat. »
>> -- Louis XIV, dans Voltaire, Le Siècle de Louis XIV, Chap. XXVI
>>
>
>
>
> --
> Simplicity is the ultimate sophistication.
>
>
>
>

-- 
Edward Doolittle
Associate Professor of Mathematics
First Nations University of Canada
1 First Nations Way, Regina SK S4S 7K2

« Toutes les fois que je donne une place vacante, je fais cent mécontents
et un ingrat. »
-- Louis XIV, dans Voltaire, Le Siècle de Louis XIV, Chap. XXVI