[GNC] How should I enter values on a budget in gnucash ?

Edward Doolittle edward.doolittle at gmail.com
Mon Nov 4 00:00:28 EST 2019


I can't help much with this any more ... I stopped using the budget
features some time ago. I found the very concept of it incompatible with
the way I use double entry accounting. I won't bore everyone with all the
details, some of which I wrote to this list a few years ago, but I can give
a summary.

I now estimate as many transactions as possible up to one year in the
future, and program it all in to the scheduled transactions editor. That
allows me to make cash flow projections for all accounts up to one year in
advance. Of course the accuracy is questionable, but as more data comes in
the projections improve, and my projections for one month in the future are
quite accurate.

In contrast, budget tools (including gnucash's) "flatten" all that
information out. That is OK if you are only looking at the cash flow
through one account (e.g., the chequing account to which your pay is
deposited), but I have numerous accounts with different conditions (e.g., I
don't want my chequing account to go below $0, but I also don't want my
credit card to go over limit, I don't want my savings to go below some
target, etc.).

Budget tools seem to be more at home in the framework of non-double-entry
accounting systems like Quacken. I'm still not sure what the right concept
for budgeting would be for a double-entry accounting system. I believe my
personal budgeting system is too complicated for the average user, so
that's not the answer. Perhaps it is to focus on just one account, like the
chequing account to which pay is deposited; in that case income is plus,
expenses are minus, and "transfers" like paying a debt are also minus
(whereas in the double-entry accounting universe paying a debt has no
effect on equity).

Perhaps instead of just focusing on one account, the right conceptual
framework is to allow the user to establish a configurable set of accounts,
and to put a fence around that set. Then moving money between accounts
within the fence has no effect on the budget, while moving money into the
fence is a plus and moving out of the fence is a minus. So for example I
could group my chequing, savings, and credit cards together inside the
fence, and I would get a budget similar to what most people would expect a
budget should be (I think!). Making a credit card payment would have no
effect on the budget, but making a car payment or mortgage payment would
count as a minus.

One last thing: a good test for how you think about these things is how you
think of a loan payment like a car payment or mortgage payment. Most people
think of loan payments as a minus, but people who understand better think
of loan payments as consisting of two components: partly a transfer to
equity in the car or house, and partly a transfer to interest expenses. Our
issues finding a good budget system are related to misunderstandings
between those two groups of people, perhaps.

Or maybe I'm just overcomplicating things, in which case just ignore me!

PS Christopher I thank you for all the work you're doing on the reports.

On Sun, 3 Nov 2019 at 03:21, Christopher Lam <christopher.lck at gmail.com>
wrote:

> On Sat, 2 Nov 2019 at 11:33, Jim Passmore <jim at passmore4.com> wrote:
>
> > TL;DR--Summary lines are good, but poorly named.  keep them.
> >
> > Regarding the summary lines, as already said Income and Expense totals
> are
> > self-explanatory.  I'll try to explain a use-case for the other lines.
> >
> > First of all, let's ignore the "transfers" part for a bit.  When I do a
> > budget, I'm concerned about inflows and outflows, and I do it all with
> > respect to my operating account (a personal checking account).  In spite
> of
> > the double-entry approach to accounting, I don't fill in expected entries
> > to the operating account--just the budgeted income and expenses.  Then
> you
> > can look at the totals to determine if your expected income will cover
> your
> > expenses and make decisions to adjust the budget (or at least maybe
> you're
> > willing for the account balance to decrease by the expense overage for
> that
> > budget period).  Having a "Total" of Income-Expenses does the math for
> you,
> > and helps you determine how much more you can plan to spend, or how much
> > more income you need, etc.
> >
> > So now let's consider the "Transfers" line.  If I want to budget some
> cash
> > to go into a savings account, I would enter the transfer amount into the
> > Asset account, and the end result to my operating account balance is
> > exactly the same as an expense--the balance goes down.  Same thing
> applies
> > to paying down a liability--it's not an Expense in the strict accounting
> > sense, but it's an outflow from the operating account.  After you collect
> > these, treating them the same as expenses in the "Total" line (i.e.,
> > subtracting them, currently) is appropriate.
> >
> > I have no idea on a use-case for budgeting changes to equity.
> >
> > As for the names "Total" and "Transfers":
> > As it operates currently, "Total" is a poor name; "Difference" would be
> > more accurate.  However, if you change the sign-reversal treatment you
> may
> > have positive income, negative expenses, and "Total" would be an accurate
> > choice.
> >
> > Transfers--isn't everything in double-entry accounting a transfer?  :-)
> >
> > Just totaling the Income/Expense/etc. would force the budgeter to do the
> > math for each period.  Having some sort of net at the bottom is very
> good.
> > Maybe call it "Net Budgeted Cash Flow"?  After all, I'm describing a
> > planned cash flow.
> >
> > Hope this made sense.
> >
>
> Actually no.
>
> I'm keen to hear feedback with real-world data from real users.
>
> C
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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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