How should I enter values on a budget in gnucash ?

[lejohnston]

Edward,

I have been tied up with other things so just got back to this.

I made the changes you suggested with Reversed Balances set to 'none'. As you can see from the attached docs this left the Budget unbalanced but the 'Budget Balance Sheet Report' no longer has 'Unallocted Assets' and has Assets $(100) and Liabilities $(100) that offset each other (if I am reading it correctly).

BTW making those changes in Preferences appears to apply to all my GNUCash documents. Although it does not seem to affect my Budget in my main file it has made big changes to my Budget Reports. Therefore I have reset it to the default.

Also sorry for the screen capture of the Budget, the window for the Budget screen has inexplicable elongated and I cannot get it resized. When I reduce the space between the Accounts and the Monthly Budget entries it adds the space between December and Totals. Very frustrating but I hope to sort it out soon. No time now.

Larry

On 03/06/17 10:03 PM, Edward Doolittle <edward.doolittle at gmail.com> wrote:
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> On 6 March 2017 at 12:43, lejohnston <lejohnston at dccnet.com> wrote:
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> > Thank-you for your detailed reply. I still have a few questions and I think you misunderstood some of my comments I will try to clarify below.
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> OK. I'm forwarding this message to the list, because I think others may be able to contribute as well. I am really just a beginner, so I always like to check whether I'm on the right track.
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> > First I think we both agree there is an inconsistancy between the 'budget' and the 'budget balance sheet report'. You seem to think it is in the 'budget' not the 'budget balance sheet report'. I lean to it being in the 'budget balance sheet report'.
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> I agree there seems to be an inconsistency, but I haven't reconstructed it myself. I'm pretty convinced by your example, though. On the other hand, an inconsistency is just that, and it doesn't mean that one or the other of the budget or the budget balance sheet are incorrect. Arguments can be made either way. 
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> What I"m trying to say is that instead of arbitrarily saying one or the other is right or wrong, we should come up with some principles which make it easy to remember how it should work. Since the budget is more fundamental than the budget balance sheet, we should think about how to get the signs in the budget right. After that's done, we can correct the budget balance sheet.
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> I gave a detailed set of principles about two messages back, but they were too complicated, and still incomplete (I didn't take into account "Reverse Balanced accounts"), and backwards. Some time soon I plan to sit down and write up carefully how I think it should work, using principles that I hope most can agree on, and which are easy to remember and "sensible".
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> > Let's go back to Geert's initial question: I want to budget a repayment of a credit card (from my bank account).
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> > How should I enter this in a budget:
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> > Bank: 100.00-
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> > Credit card: 100.00-
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> If we have "Reverse Balanced accounts" set to "Credit accounts", then that is right. The balance in the asset is decreasing by $100, and the balance in the credit card account is also decreasing. 
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> Now go to Edit -> Preferences -> Accounts -> Reverse Balanced accounts and set it to "None". Then the correct way to represent that transaction is Bank: -100, Credit card: +100. (That is nice because the sum of the changes is 0, which is exactly what it should be in double entry accounting, which is why some people might prefer it that way. However, most people are not used to seeing negative balances, which is why the default is "Credit accounts" rather than "None".)
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> This shows that there should be an interaction between the "Reversed Balanced accounts" setting and the signs in the budget. I believe the interaction is not properly set up in the budget module now, so that's one fix that has to be made.
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> > I see this as a transfer of $100 from checking to credit card. Leaving aside whether or not it makes sense to enter this transfer in the budget, I see doing this by budgeting $(100) in checking which would decrease my checking account balance and $(100) in my credit card account (which would decrease my liability). There should be no overall impact on my net worth (I am not clear on the relationship between net worth and Equity, as Equity seems only to be determined at the end of an Accounting Period). Since this action balanced my budget it leads me to believe that the Budget is working correctly.
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> Net worth and equity are approximately the same thing. Equity can be determined at any moment; just run a balance sheet report at that moment, and you will find a line for total equity at that moment. 
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> There is perhaps some confusion between Equity and an Equity Account. Let's just not worry about what happens with Equity Accounts in what follows, since they're seldom used, only for special occasions.
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> > Do you think that the Budget entries should have been handled differently and if so why?
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> I think we've nailed it down. The fundamental principle could be expressed this way: if Reverse Balanced accounts is "None", then a debit to an account in the budget should be positive. If Reverse Balanced accounts is "Credit accounts", then a debit to Assets or Expenses is positive, and a debit to Liabilities, Equity, or Income is negative. (And for completeness, the third setting of Reverse Balanced accounts would be taken into account as well.)
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> Now we need to know what a debit would be. I have found it helpful to think about it this way: Increasing an asset is always a debit, and debits are always paired with credits in a simple transaction, so earning income (which would increase assets) is a credit to Income; borrowing money (which would increase assets) is a credit to Liabilities; refunding an expense (which would increase assets) is a credit to Expenses.
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> Now the usual use case: If Reverse Balanced accounts is set to Credit accounts (the default), then increasing an asset in the budget should be positive; paying an expense should be positive; borrowing money should be positive; and earning income should be positive. The unallocated (excess?) amount in a budget would then be calculated as Change in Income - Change in Expenses + Change in Liabilities - Change in Assets.
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> I won't detail how it should work if Reverse Balanced accounts is set to None, but whoever patches the software will have to work it out.
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> I don't have Gnu Cash handy at the moment to check whether that's the way the budget currently works. I'll check tomorrow.
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> > On 03/05/17 09:58 PM, Edward Doolittle <edward.doolittle at gmail.com> wrote:
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> > > On 4 March 2017 at 13:56, lejohnston <lejohnston at dccnet.com> wrote:
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> > > > I have changed my opinion about how the figures should be entered. Essentially they are budgeting to transfer $100 from checking to credit card. Therefore both numbers should be entered as negatives. This would still balance in the budget but shows money leaving the checking account (an Asset) and moving to the credit card (a Liability).
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> > > What the change in balance sheets shows is the following: you have withdrawn $100 from checking, and withdrawn $100 from credit card. That leaves you with an overdraft of $100 in checking, and a balance of $100 on your credit card, and $200 "unallocated" cash in the virtual budget account.
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> > Here I disagree. I merely budgeted to move $100 from checking to credit card and so there should have been no 'unallocated' cash as a result.
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> You're right ... from the point of view of the budget. But the budget balance sheet clearly shows an unallocated amount of $200. That means (according to the scheme developed above) that the budget balance sheet is wrong.
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> > I did another test today. I budgeted to move $100 from one checking account to another. That is: checking account1 $(100) and checking account2 $100. Because these are two Asset accounts one would be negative and the other positive. The result is a balanced budget and a 'budget balance sheet report' that is all zero's. No 'unallocated' cash no change in Assets, Liabilities or Equity. This is the result is logical but contrary to what happened when I bugeted to transfer funds from checking to credit card.
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> Transfer from one asset to another will never be enlightening in this scenario. It will always work as you expect. The issue is how liabilities work, in particular the interaction between liabilities and any other type of account.
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> > > > I did this in a new 'test' file and got the result I expected in the Budget itself. That is I ended up with a balanced budget.
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> > > It shouldn't be balanced, you now have $200 unallocated. If the budget and the budget balance sheet disagree on this point, then they are inconsistent in their interpretation of signs, which is bad, and which is what Geert is worried about.
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> > As I stated above I don't believe there should be $200 unallocated because I merely budgeted to transfer money between two accounts.
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> Yes, that was your intention, and you actualized it correctly in the budget. The budget balance sheet is wrong because there is a bug in the budget balance report software.
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> > What confuses me is that in this case I do not owe $100 on my credit card, I have actually budgeted to move $100 to my credit card account, so in fact my liabilities have been reduced.
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> I understand that is your intention, and that is what you accomplished in the budget. My comments were based not on the budget, but on the budget balance sheet images that you sent. The budget balance sheet is incorrect, which is not your fault.
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> > It is important to note that the 'Budget Balance Sheet Report' does not include the balances of your accounts, It only reports the amounts you have budgeted in each of those accounts. For this reason I have not found it a useful report. My interest in it at this point is merely what it tells us about underlaying issues in the budgeting and budgeting reports in GNUCash.
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> I've never used the budget balance sheet myself, and I suspect that literally no one in the world ever has, otherwise this bug would have been caught earlier. I also wonder what use it is. I guess we should try to get it right, and then maybe people will start using it, and a use for it will become obvious?
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> Unless I'm hallucinating about all this ... it's getting late. I'd like to run through this one more time in detail, with Gnu Cash running in front of me, to check it all thoroughly.
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> > TIA for any insight you can provide,
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> > Larry
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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
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