Discretionary Member Encumbrances

Mike or Penny Novack mpnovack at mtdata.com
Thu Jul 14 13:30:25 EDT 2016


On 7/14/2016 9:46 AM, Aaron Laws wrote:
> In my personal books, my wife and I have discretionary accounts that are
> populated when we exercise or eat healthily. We then spend the money as we
> like. The money never actually moves from our checking account until it's
> spent. How should I be accounting for this in my books? For the two
> transaction types: populating the discretionary account and spending money
> from that discretionary account, how should they look? What type of account
> should the discretionary account be? Thanks!
I would handle this the same way I do for organizations that have 
restricted funds without a separate bank account for each. You partition 
the bank account. For example, here the bank account is checking.

1) Create a parent account named checking. The parent total will show 
the actual checking account balance from the bank's point of view, what 
you will reconcile against (old sense of that term).
2) Create a child account for checking. It is this account where 
deposits will  be made, checks written, bank charges and interest 
recorded, AND transfers to and from the restricted accounts.
3) Create child accounts for these "discretionary accounts". You would 
transfer in what has been "earned". You would transfer out when such 
discretionary amounts are spent. When you are practiced with entering 
split transactions to the point able to do two way splits need not be a 
separate transaction.

Michael D Novack




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