[GNC] Contingency Funds was: Re: How to record Personal income tax ?

Eric H. Bowen eric at ehbowen.net
Sat Mar 21 10:17:24 EDT 2020


While I do agree that for specific tax guidance Mr. Long should turn to
experts from his locality and system of laws, it seems to me that what
would help him is information on setting up and using a "Contingency
Fund"...in his case, for taxes, but in the general it could be applied
to maintenance or other unpredictable expenses where your funds are
commingled with, say, your checking or savings account but where you
wish to designate a specific portion of those commingled funds for that
purpose and add to it on a regular basis whenever it drops below a
certain level.

Suppose, as an example, that you had a nonprofit such as a small church
with one savings account. They keep $12,000 in a maintenance contingency
fund. One day the air conditioning compressor for their sanctuary goes
out, and it costs $3,500 to repair which was not in the regular general
maintenance budget. They wish to pay for the repairs out of their
contingency fund, and then direct, say, $250 per month back to the fund
until it returns to the $12,000 level.

This could address Mr. Long's situation; say that he sets aside $350 per
month (or whatever his accountant/bookkeeper tells him is a reasonable
estimate) in a tax contingency fund and at the end of his accounting
period, with help from his accountant, he determines his actual tax
liability and pays that amount out of the contingency fund. The balance
of the fund then could be set aside for next year's taxes or
redesignated for general spending.

I'd appreciate guidance in this matter myself as I'm trying to set up
Gnucash for my own church. I do plan to retain a local accountant to
review my accounts and books, but I'd like to do as much of the basic
groundwork myself as I possibly can. Thanks for any help.


--------Eric H. Bowen
eric at ehbowen.net <mailto:eric at ehbowen.net>
On 3/21/2020 6:07 AM, gnucash-user-request at gnucash.org wrote:
>
> Message: 9
> Date: Sat, 21 Mar 2020 05:34:13 -0500 (CDT)
> From: Long <Phamhoanglongvn at outlook.com>
> To: gnucash-user at gnucash.org
> Subject: Re: [GNC] How to record Personal income tax ?
> Message-ID: <1584786853837-0.post at n4.nabble.com>
> Content-Type: text/plain; charset=us-ascii
>
> Hello,
>
> Thank you doncram and david cousens,
> Yes, I'm not accounting and having trouble to record that problems. Please
> help me if i'm going wrong again.
> Example: Let make things easier to understand for me.
> 1 - I will pay rent at the first month of each year = i will pay tax at the
> first month of year.
> 2 - I do not pay rent to landlord each month = i do not pay tax to
> government each month.
> 3 - i just accumulated my money each month to pay rent = same to pay tax.
> 4 - In fact, I'm owed to my landlord each month because using his house =
> it's the same thing about pay tax.
>
> => For 4 things i talking above : in GnuCash, i need to create "Liability"
> about pay rent, each month, i need to credit "liability:pay rent" and debit
> to "expenses:pay rent". After 12 months, i will pay rent to landlord by
> credit my "assets" and debit to "liability". Right?
> So, i should do the same thing to PAY PERSONAL INCOME TAX ?
> I will have "Liability:Tax" and "expense:Tax", transfer my money each month
> between that account, at the end of the year, my government will tell me
> what amount i need to pay, if the amount are smaller, i will make a refund
> from "expense:tax" to "liability:tax" and pay it, if larger, just plus more
> amount into "expense:tax". Right?
>
> For that things above: Is it called accrual accounting ?
> Example i wrote above told me that: GnuCash still look like the real life.
>
> P/S: I'm not accounting, and i respect you (all guys) for take your time to
> help me. Thank you.
>
> Regards.
>
>
>
> --
> Sent from: http://gnucash.1415818.n4.nabble.com/GnuCash-User-f1415819.html
>
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