How to create an asset with a reduced value compared to my regular currency (dollars)

Thu Dec 7 17:53:19 EST 2017

Adrian,

While I am not an accountant, historically I have used a method similar to
that suggested by Adrien.  However, I am intrigued by the answer provided
by Michael Novack, as it avoids the problem of overstating potentially
taxable income without needing to have a group of accounts to segregate
before running your tax reports at the end of the year.

Thus I am considering switching to a method modeled on his suggestion.

David C

On Thu, Dec 7, 2017 at 4:19 PM, Adrien Monteleone <
adrien.monteleone at gmail.com> wrote:

> I have to concur on the $70 gift idea.
>
> You paid $430 for a stored value card that has $500 on it.
>
> This is no different than if you handed a bank teller $430 in small bills
> and they returned to you 5 one hundred dollar bills. (assuming the bank is
> just fine with that)
>
> When you spend $100 from this card you aren’t really spending $86. You’re
> spending $100.
>
> After you’ve spent $430, the next $70 on the card is a gift to you from
> whomever sold you the card.
>
> But you can’t truly determine which $70 is gift and which isn’t.
>
> The easiest and likely most correct transaction is this:
>
> Dr. Assets:Cash $430
> Dr. Income:Gift Received $70
> Cr. Assets:Prepaid Card $500
>
> When you use the card, all transactions are just normal as if you’d paid
> $500 for it.
>
> There is no discount. There is no rebate. You received a ‘gift’ of $70 in
> the form of extra stored value on the card.
>
> Had you paid nothing and received a card with a $70 value, the transaction
> would be:
>
> Dr. Income:Gift Received $70
> Cr. Assets:Prepaid Card $70
>
> Note, the difference is NOT the $70. The difference is what you paid for
> the extra value, in this case $430.
>
> Had you paid $430 for one card and the merchant gave you a separate card
> with $70 value on it (that’s two cards totaling $500) then your entries
> would be this:
>
> Dr. Assets:Cash $430
> Cr. Assets:Prepaid Card $430
>
> Dr. Income:Gift Received $70
> Cr. Assets:Prepaid Card $70
>
> There’s no fundamental difference in these two separate transactions than
> the combined transaction above. They record the same net amounts in the
> same places. The fact that all of this takes place on one card instead of
> two, or that the gift is from a merchant instead of a family member or
> friend does not change the nature of the transaction.
>
> You can record anything you want the way you want if this is just for you
> to keep track of, but the goal should always be to use transactions to show
> an accurate picture of what happened. What happened is NOT that you saved
> money on future purchases. What happened is you received a gift of $70 in
> the form of a stored value card.
>
> But by all means, ask a CPA if it’s that important to you.
>
> Regards,
> Adrien
>
> > On Dec 7, 2017, at 3:46 PM, nvsoar <nvsoar at charter.net> wrote:
> >
> > On 12/06/17 12:44, adrian wrote:
> >> Tommy Trussell wrote
> >>>> Adrian:
> >>>> In the case at hand I spent $430 on the gift card and when I buy
> >>>> something
> >>>> that costs $100, I'm really only spending $86.  That's what makes
> sense
> >>>> to
> >>>> me for how this ought to be counted.   Since I don't know the
> category of
> >>>> the expense in advance, I can't just put in a $70 offset unless I put
> it
> >>>> as
> >>>> "misc", in which case I lose track of some information about how I
> >>>> allocated
> >>>> my money.
> >>>>
> >>> I went back to your original question (remember that this is NOT a
> forum
> >>> --
> >>> it's an email list that you're viewing through Nabble)
> >> Yeah, despite that I have been unable to actually subscribe to the list.
> >> But your point was you wanted more context, I suppose.
> >>
> >>
> >>>> I bought a $500 gift card for $430 this week.  I would like to add
> this to
> >>>> gnucash as some kind of asset so that as I spend it, the correctly
> scaled
> >>>> amount gets transferred to the expense account I use.  In other
> words, if
> >>>> I
> >>>> spend $100 from this account it's really only $86.
> >>>>
> >>>> I tried to do this by creating a security fund and then using the
> price
> >>>> editor to set the price to 0.86.  But when I insert a transaction from
> >>>> the
> >>>> new account to an expense account, it doesn't apply the 0.86 factor.
> >>>> What
> >>>> is the right way to do what I want to do?
> >>>
> >>> I think you have demonstrated the difficulty with what you're trying to
> >>> do-- you're trying to make a rebate card a different KIND of currency,
> >>> which in one sense, it is. HOWEVER every time you make a purchase from
> >>> that
> >>> card it will require a currency exchange, which adds a level of
> complexity
> >>> and may not produce the result you want.
> >>>
> >>> I'm sure you could make it work, but in the end, it's a lot easier to
> just
> >>> offset the $70 against the expenses. TECHNICALLY you don't get benefit
> of
> >>> the full amount you spent on the card until you have completely
> depleted
> >>> the value of the card, but that would be a PITA (sorry for the acronym
> --
> >>> I
> >>> mean "difficult").
> >>>
> >>> I think the real answer is to go back and think about what it is you
> want
> >>> to achieve.
> >> I'm not sure what exactly is unclear.  I am thinking of the acquisition
> of
> >> this card not as a purchase, but as a shift of assets from one form to
> >> another.  So instead of $430 in the bank I now have a different asset,
> >> namely $500 on the card.   Yes, it's true, I don't benefit until I
> spend the
> >> money.  But the same is true of money in the bank.
> >>
> >> But it's not really $500 on the card because I only spent $430 on it.
> It is
> >> exactly like a currency exchange, though it's not obvious to me why this
> >> means my goal is a very complex one.   It seems pretty simple to have an
> >> exchange rate and have the card denominated in some currency, say the
> Gifta,
> >> that is equal to .86 dollars.  When I buy something using the card I
> can go
> >> to the card's account and list the expenses in Giftas and they will be
> >> automatically translated by the 0.86 factor.   (I assume that if I made
> an
> >> account denominated in, say GBP, that I would be able to get that to
> >> translate to the USD that I use for my regular accounts; after all,
> this is
> >> something that is important to many people.)
> >>
> >> Now actually I realized that the solution I was fiddling with can be
> made to
> >> work. As I mentioned before, I made an account and created a security
> and
> >> tried to set its price using the price editor.  For some reason the
> Price
> >> Editor doesn't seem to do anything, but there is a column labeled
> "Price" in
> >> the account I made, and if I set this to 0.86 (which I have to do
> manually
> >> for every transaction, it seems) then things work as I was hoping.
> (And I
> >> notice that prices I enter in the ledger appear in the price editor even
> >> though the reverse doesn't seem to be the case.)   It would be even
> nicer if
> >> I could set the price once and have that same price stay in effect
> until I
> >> change it, rather than having to enter it again for each transaction
> with
> >> the default price being "1".
> >>
> >> Why do I care?  It's just so that my accounting correctly tracks my
> >> expenditures in different categories.   I don't need to use accounting
> >> software to do price comparisons, but if I want to know how much I
> spent on
> >> Widgets this year---and I buy some using the card---the number will be
> >> inflated if I don't account for the discount.
> >>
> >>
> >>
> >>
> >>
> >> --
> >> Sent from: http://gnucash.1415818.n4.nabble.com/GnuCash-User-
> f1415819.html
> > Hmmmm.  Seems to me that you received a $70.00 gift along with the card.
> > nvsoar
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