Discretionary Member Encumbrances

[Aaron Laws]

On Thu, Jul 14, 2016 at 1:30 PM, Mike or Penny Novack <mpnovack at mtdata.com>
wrote:

> 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
>

So a transaction using the discretionary funds looks like this?

Junk Food                  5
        Credit Card                    5
Checking                   5
        Discretionary                 5

Is this an inappropriate combination of two transactions?