[GNC] help to set up equity sub-accounts opening balances

Adrien Monteleone adrien.monteleone at lusfiber.net
Fri Aug 7 15:38:27 EDT 2020


Marilyn,

This does complicate things a bit, but your concept is still doable.

Warning: Long Read Ahead



If you don't want to create another real-world 3rd (or more) account(s) 
at one of your financial institutions, you can still track this 
virtually, and maintain sanity for reconciliation of both Checking and 
Savings, with a bit of extra work.

The idea is to create a new tree or sub-tree of accounts for your 
Fund(s). The option will be where to put it. The mechanics are the same 
regardless of this choice.

Since you are co-mingling virtual earmarks from separate real accounts, 
you'll need some extra virtual accounts to keep everything balanced. 
This will also necessitate extra transaction splits for each and every 
transaction involved with this virtual tracking.

* — for clarity, I'll be using the proper noun 'Fund' to refer to the 
'virtual entity' that you want to work with, not just generic 'money'.

You probably don't need sub-accounts of Checking and Savings for each 
Fund in this case, just a single 'Checking:Fund Contribution' / 
'Savings:Fund Contribution' under each or something similar. This will 
allow you to deduct from the account(s) while retaining the ability to 
see roll-up balances and conduct a reconciliation without mental 
gymnastics. You will be able to see at a glance how much you have 
earmarked from that particular account, as well as the non-earmarked 
balance that remains in the parent available to spend.

As long as this is for personal use (without tax/legal documentation 
requirements) then you can structure your book however you like, but 
there are reasons for 'best practices'. Accounting texts and online 
resources can help here. Find a good personal chart of accounts example 
and try to model that. Look at several examples as some will include 
more detail and explanation than others. (you can of course always get 
professional CPA advice, and if this is for a business, I'd strongly 
recommend it!) Those examples probably won't include 'virtual tracking' 
but they are good for the 'real' accounts you should have.

First, I'll outline the account organization options, then I'll go over 
the entry procedure.

-----
Option 1: Assets


Every new account you create should be of fundamental type 'Asset'.

You'll need to create a new parent account for all of your various 
earmarked Funds, e.g—

   Assets:Current Assets:Earmarks

It should be under Current Assets since it is liquid. (it is technically 
not different than Checking or Savings, which are current assets)

Mark this account as a placeholder.

Create a sub-account, called perhaps 'Funds'. (maybe not the best word, 
because it could be confused with another GnuCash account type, but use 
what works for you) Also mark it as a placeholder.

   Assets:Current Assets:Earmarks:Funds

Now, create sub-accounts for each Fund you want to track.

   Assets:Current Assets:Earmarks:Fund:Fund_1
   Assets:Current Assets:Earmarks:Fund:Fund_2
   Assets:Current Assets:Earmarks:Fund:Fund_etc

You'll need one more virtual account for balancing. Make this a 
sub-account of Earmarks.

   Assets:Current Assets:Earmarks:Balancing

(It doesn't really matter what you name this, it is just for 
double-entry. It has no other purpose or meaning really.)

-----
Option 2: Equity

Same as above in all respects, except make these accounts all of 
fundamental type 'Equity'.

Place them higher up the tree like so:

   Equity:Earmarks
   Equity:Earmarks:Funds
   Equity:Earmarks:Funds:Fund_1
   Equity:Earmarks:Funds:Fund_2
   Equity:Earmarks:Funds:Fund_etc
   Equity:Earmarks:Balancing

-----
Option 3: New Top Level

Same as above, but the fundamental type can be either 'Asset' or 'Equity'.

This would look like:

   Earmarks
   Earmarks:Funds
   Earmarks:Funds:Fund_1
   Earmarks:Funds:Fund_2
   Earmarks:Funds:Fund_etc
   Earmarks:Balancing

(some people do this and call the Tree 'Budgeting' or 'Envelopes', etc.)

I suppose this could also be considered (or as Option 4) as type 
'Liability' as some people may think of these Funds as being something 
they have pledged.

*note — You can have (as far as I know) as many 'Top Level' accounts as 
you like and name them whatever you like. But they *should* be one of 
the fundamental types (Asset, Liability, Equity) and definitely *not* 
one of the special business types. (Accounts Receivable/Payable) Some of 
the other special GnuCash types (Cash, Bank, Fund[Mutual Fund], Credit 
Card, Stock, etc.) might be possible, but I've never tried them or seen 
if that is at all recommended.

-----
Entry Procedure
===============

Step 1: Earmarking
------------------

As noted before, as you calculate the contribution(s) you want to 
earmark, make a transaction between the source account and Fund 
Contribution sub-account like so:

Dr. Checking/Savings:Fund Contribution
Cr. Checking/Savings

This will now show the 'available' (to you) money left in the respective 
parent, as well as how much you've earmarked from each.

Here's the virtual part:

Now either as part of the same transaction (recommended) or separately, 
you need to involve the Fund(s) and then the Balancing account.

So as an all-in-one:

Dr. Checking/Savings:Fund Contribution
Dr. Fund_1
Dr. Fund_etc.
Cr. Balancing
Cr. Checking/Savings

Or separately:

Dr. Fund_1
Dr. Fund_etc.
Cr. Balancing

Putting all the splits in a single transaction will clearly show you 
what money was earmarked to where, from where, and when. Doing separate 
transactions can still show the same info, just not in one place as it 
all occurred. (remember what I mentioned about 'modeling the 
real-world'?) The earmarking is occuring all at once and that is the 
entire purpose of the original transaction, the extra Fund splits are to 
facilitate your tracking. They aren't a separate event.

Now, in the Earmarks part of your tree (wherever you put it):

   *The balance of Earmarks will be zero. (Funds - Balancing)

   *The balance of Funds will be the sum of the child Funds (the total 
amount earmarked from both Checking and Savings)

   *The balance of each child-account Fund will be the amount you've 
earmarked there.

   *The balance of Balancing will be the same as Funds but negative.


There are no 'Opening Balance' entries in this method. Each amount 
earmarked needs to also have a corresponding activity between the 
Checking/Savings and Contribution accounts. If you already have some 
funds earmarked, you should have those original transfers from 
Checking/Savings to Contribution accounts and then you can add-in the 
Fund_etc/Balancing splits.


Step 2: Spending
----------------

Again, for future sanity, try to model the real-world.

Since the funds are coming from either Checking or Savings, that's what 
the core transaction needs to look like:

Dr. Expenses:(whatever relevant)
Cr. Checking/Savings

But you took those funds out, so they need to be put back in first 
(ideally):

Dr. Checking/Savings
Dr. Expenses:(whatever relevant)
Cr. Checking/Savings
Cr. Checking/Savings:Fund Contribution

You *could* spend directly from the virtual Contribution accounts for 
less typing:

Dr. Expenses:(whatever relevant)
Cr. Checking/Savings:Fund Contribution

Now you also need to reduce your Earmark accounts:

Dr. Balancing
Cr. Fund_(whatever relevant to match the expense)

As with Step 1 above, I'd probably include those Earmark splits as part 
of the original transaction.

Dr. Checking/Savings
Dr. Expenses:(whatever relevant)
Dr. Balancing
Cr. Fund_(whatever relevant to match the expense)
Cr. Checking/Savings
Cr. Checking/Savings:Fund Contribution


-----
Reconciliation
==============

If you spend directly from the Contribution accounts, when reconciling 
the Checking or Savings accounts, tick the box to 'include sub-accounts' 
proceed as normal. If you instead first return the money to the main 
accounts, you do not need to do this, just reconcile as normal as all 
real transactions are in the parent account.

-----
Reporting
=========

The P&L (Income Statement) and Balance Sheet should all operate as 
normal. For the Balance Sheet, be sure to *not* include any virtual 
accounts (earmarks) but *do* include the Contribution accounts as 
otherwise your assets will be understated. The P&L only involve Income & 
Expense accounts and since you only touched those in real transactions, 
that report should still look as if you didn't do any virtual tracking 
at all.

You can now craft interesting Transaction reports on the Contribution 
and Earmark accounts as desired.

If your Earmark tree is of type Asset or Liability, you can involve 
those reports. (like various Charts) If you choose type Equity, you 
won't be able to do those reports without exporting something like a 
Transaction Report to a spreadsheet and creating charts or custom layouts.


-----
Advanced Entry
==============

If you earmark money regularly(like weekly or monthly), and you do so 
according to a set formula (10% to Fund_1, 13% to Fund_2, etc.) then you 
can set up a Scheduled Transaction(SX) using a custom variable.

For the template of this SX, put the splits between source and 
contribution accounts as 'n*profit' or something similar, e.g—

   Dr. Checking:Fund Contribution 	0.65*profit
   Dr. Savings:Fund Contribution		0.35*profit
     Cr. Checking					0.65*profit
     Cr. Savings						0.35*profit


Then each Fund would be, e.g.—

   Dr. Fund_1				0.10*profit
   Dr. Fund_2				0.13*profit
   Dr. Fund_etc.				0.77*profit
     Cr. Balancing					1*profit

But this would all be one big transaction.

Set the SX to remind you and auto-create as desired. When the SX fires 
on the scheduled date, it will prompt you for the value of the 'profit' 
variable and do the math accordingly, entering the earmarking 
transaction with all splits for you. Be sure to also check the option to 
review the transaction before it is created. This way, you can tweak 
amounts as desired.

*tip – Do the Earmarking manually once or twice though to fully grasp 
the process, then you can right-click one of those transactions and turn 
it into a Scheduled Transaction and adjust with your formulas.

*hint — I've used this to auto-allocate a paycheck to budgeting 
'envelope' accounts.

-----
Hope that helps!

Regards,
Adrien

p.s. — yes to anyone wondering, I do plan to write this up on the Wiki 
(more generally as 'virtual tracking') but I have some other Wiki 
projects pending at the moment. I'll post back to the list when it is up.

On 8/7/20 6:11 AM, Marilyn Graves Kimple via gnucash-user wrote:

> I thank you all for your suggestions, and this sounds like the simplest. These are indeed "virtual" accounts; the only problem is that they include funds from both my checking & savings "real-world" accounts. Maybe I could set them all up under savings and show a 'virtual deficit' which would represent funds that are actually in checking?
> I tried making sub-accounts under the Equity>Opening Balance and entering initial amounts for my virtual accounts backwards so they would show up as negatives (part of the opening balance), but of course I could not write a check and credit the amount to both checking (asset) and a virtual account, so that did not work.
> I miss my old (ancient) program, where I could set up equity accounts as "funds", allowing me to post to them as I would income or expense accounts.
> How do others use Equity sub-accounts? Do they have to correspond to a "real-world" account?



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