Entering RRSP Transaction in GnuCash

Edward Doolittle edward.doolittle at gmail.com
Sun Apr 12 19:11:11 EDT 2015


Correction: my second last paragraph, last few words should say "they
should also count as taxable income". :-)

On 12 April 2015 at 16:56, Edward Doolittle <edward.doolittle at gmail.com>
wrote:

> 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.
>>>>>> _______________________________________________
>>>>>> gnucash-user mailing list
>>>>>> gnucash-user at gnucash.org
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>>>>>> -----
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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
>



-- 
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


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