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

[Michael or Penny Novack]

> P/s: I saw that some people who always use some tricks when using GnuCash ,
> like create some "Virtual" Account to manager their money, I DON'T LIKE
> THAT.
>
Not a trick. Virtual accounts and for that matter books for virtual 
entities not some kind of "trick". They can be quite useful.

Envelopes, reserve accounts, etc. are virtual. OK, if a reserve account 
has an actual bank account of its own, not virtual. But when you 
partition a single bank account as if it were more than one, that is 
virtual. Nothing real would prevent you say from writing a check for 
more than the balance of the "remainder" partition. It wouldn't bounce 
as long as the total in the real bank account went below zero. The 
partitioning would just be a reminder to you not to do that, a virtual 
boundary.

Virtual entities might also be useful. To use the example I have given 
before, I want to know how our solar system performs AS IF it were an 
investment with existence separate from ourselves. What is the return on 
this investment taking into account things like the time value of money, 
how it affects/changes other expenses of ours like taxes and insurance, 
etc. In other words, a CORRECT financial analysis instead of the 
incorrect (oversimplified) ones those who get solar systems are shown. 
REAL transactions affect our personal set of books. Those would not show 
things like electric bills we did not have to pay, etc.

So ...... I created a virtual entity, "Our Solar System" and a set of 
books for it. As if it were an (actual) entity to which we had made a 
loan for its capital (shown on our books as such) and which pays 
interest (tax free) and makes loan principle payments. It has income, 
tax credits, electric bill amounts we did not have to pay, and sale of 
SRECs. It has expenses, depreciation, loan interest, share of property 
insurance, and implied taxes on the SREC sales. From profits, it makes 
principle payments against the loan. Once the loan has been paid off 
will become an equity investment (an asset) producing "dividend" income.

SOME of these transactions are "real" (appear on both sets of books) and 
others are not. But this does not make the virtual entity a "trick". 
Rather, it is a useful way of obtaining information that would be very 
difficult to extract form our "real" books.

Michael D Novack