[GNC] envelope method, equity sub-accounts, cash vs. hybrid vs. accrual accounting

Michael or Penny Novack stepbystepfarm at comcast.net
Wed Aug 12 10:52:02 EDT 2020


On 8/11/2020 8:32 PM, doncram wrote:
> The idea of "envelope method" then is to mirror the model of budgeting and
> control done by real life envelopes holding the cash allowed to be spent in
> each budget area.  This is an inspiring model/image.  The physical model is
> very visual, very clear... each envelope of cash is a continuous visible
> indicator of how much more can be spent in that category.  It is alarming
> if one runs low or empty.  If overspending really does have to be done,
> then cash must be "borrowed"/transfered from another envelope/budget
> category.  In a household where one person has the envelope for groceries
> vs. another has the envelope for clothes purchases, there would be
> "transaction costs" or punishments of having to beg other person to fork
> over some of their budget.  I see the appeal of trying to make an
> accounting/budgeting system follow that.  However....
>
There is a fundamental important difference no matter how you try to 
implement in gnucash (or pretty much any software).

With physical currency in physical envelopes or somebody else holding 
the different debit card there is no such thing as negative dollars. In 
other words, if you actually need the enforcement provided by 
physicality, if lacking in the discipline to follow a budget unless so 
enforced, gnucash can't help you nor probably any other program.

What do you want here? A way of specifying for an account that cannot go 
opposite? That a transaction would be refuse to enter if it was doing 
that? TOO LATE. When you enter the transaction in gnucash (or anything 
else; even old fashioned pen and ink on paper) it has already happened. 
You are just recording that fact in the books. Understand? If you want 
accounts in gnucash to represent the envelopes you still need to have 
that physical cash in physical envelopes for enforcement <<in the case 
of separate debit cards would, be separate bank accounts, so regular, 
not "virtual" accounts in gnucash>>

Even in the case of entities with legally enforceable budgets this is 
true. Just because there is no more money left in the budget for 
expenses of a certain category doesn't mean if a check is written that 
would fall in that category it would bounce. Or that the entity could 
say to whoever got that check "sorry, the budget for that was exhausted, 
send the money back". If something is done wrong (with respect to an 
enforceable budget) somebody is in trouble, maybe deep trouble, or a 
board might have to call an emergency meeting to authorize or a town a 
special town meeting (I'm in new England) to authorize << but even in 
that case, the voters could say "NO" >>

Michael D Novack





More information about the gnucash-user mailing list