[GNC] Registering Off Balance Sheet in GNUCash

[Michael or Penny Novack]

On 4/11/2023 10:25 AM, Murugan Muruganandam wrote:
> I wanted to input off balance sheet items in gnucash , contingent asset and contingent liabilities.  any of you have done this with existing account structure?

Yes, some of us might have very significant amounts of what is in effect 
our income, net worth, etc.) in things that involve "contingencies"

a) If in business and or an organization with significant contingent 
liabilities, seek professional help how they should be presented in 
reports. Note I mean the word "reports" in its more general sense, NOT a 
report directly out of gnucash, though the data might be from gnucash 
reports.

b) I'd keep the contingencies off the main books (the main Balance 
Sheet) but that doesn't mean I wouldn't be accounting for them as might 
be a very large component of "net worth", actual effective "income", 
etc. Keep in mind that gnucash can be keeping multiple sets of books, so 
you do have the choice of using gnucash to do that with instead of 
spread sheets, etc.

     Thus you could have a net worth (unconditional() form your main 
books balance sheet and a "contingent net worth" from your contingent 
books and you can add those up (outside of gnucash) to see your absolute 
+ contingent net worth total, your real + virtual income, etc.

c) There are other situations where you might be wanting to keep 
"virtual" sets of books. Thus when we had solar installed, I wanted to 
know how this was performing AS AN INVESTMENT. When would it have paid 
off for itself in reality (time value of money, imputed income and 
expenses, etc. -- not the overly simplified illustrations given you when 
they are selling you the system). To do that I created a set of books 
for the virtual entity "solar system" which "borrowed" from us it 
initial capital at (then) market rates for 20 year fixed rate money. The 
system had "income" in the form of utility bills paid on our behalf, 
SRECS sold, tax credits transferred to us, etc. It had expenses like 
"tax liability incurred", "portion of property insurance", "cost of 
repairs" (none ye), and "interest payments". As "cash" accumulated in 
the asset "undistributed cash" (in effect, the profits) this was used to 
pay down the liability (the loan we made to it) and when that reached 
zero, the loan was paid off. Each year, the total sake if SRECs in that 
year noted when filling out the 1040 (and state income tax) but 
otherwise no actual transactions between our personal set of books and 
this virtual set of books.

Of course NOW, with the system having paid off the loan, things are 
different. Profits going into a ":repair and replacement fund" which is 
in effect a zero interest loan it is giving to us << when we do 
eventually have to lay out money for repair/replacement we will see that 
not actually "from our pockets" but money the system had prior loaned to 
us against this evil day.

Note that this did NOT involve a great deal of duplicate data entry as 
only transactions involving real money entered into both sets of books. 
SRECs only sold quarterly, property insurance annually (no component for 
property taxes as in this state, home solar immune from that for 20 years)

d) Note that organizations that keep books on the cash basis (common) 
but whose membership wants "statements" can use a set of virtual books 
(under accrual) for just that purpose. This does require duplicate entry 
of transactions but these typically only one per member (unless paying 
monthly is allowed). The "virtual" set of books used only to track 
member status, who has paid, who still owes, etc. Everything else simply 
ignored. Note that is more closely resembles legal reality as membership 
dies for voluntary organizations is not actually a "receivable" (there 
is no legal requirement to renew, regardless of the rules of the 
organization*)

Michael D Novack

* For example, we belong to the Grange (Patrons of Husbandry). The rules 
of the organization require a "demit" to quit without penalty. But if we 
left (stopped paying dues) without having received permission (the 
"demit") this would come into play only if we later wanted to rejoin.