On Tue, 20 Jun 2000, Todd Greer wrote:
> I would like to request some advice regarding account structure from
> the nice folks here:
I'll give it a stab. Remember that there is no "right" way to do it.
There are only "workable" ways. Further, IANAA.
>
> I have a 401(k) into which a portion of every paycheck goes. I took
> out a loan from that 401(k), and a portion of every paycheck also goes
> into that.
>
> I'm quite confused about how to handle this loan, as it seems to me
> that it is both an asset and a liability. It is a liability, because
> it is something that I must pay back. It is an asset because the
> 401(k) is essentially currently invested in this loan. It is a loan
> from one account (401(k)) to another (checking), that is being repaid
> out of an income account (pay).
See the bottom of my reply.
> Perhaps this is part of a larger question: how should I deal with the
> 401(k) in general?
Create an account for it.
> It has two mutual funds and a loan to me that it is invested in,
Each of these gets its own subaccount.
> it receives deposits from my paycheck,
Your payroll transactions will shove the money into the parent account.
> and its value fluctuates with the market.
Actually, each component fluctuates. Enter the price of each component.
> I've been just shoving the deposits in,
> but this has been leaving out my company's matching funds
Deposit them from a separate income account.
> and changes
> in value, so the value of my 401(k) as reported by my bookkeeping
> currently bears no relation to reality.
It will when you add the current prices.
> I don't care about its value
> being correct on a daily basis, but it might be nice to make it
> occasionally correct.
Enter prices every statement. You should reconcile that statement like any
other. You may enter prices more frequently if you desire.
The other thing that you will need to do is "purchase" shares of the mutual
funds with the cash in the parent account.
Now, as to the loan, it is a liability within the 401k account.
When you took out the loan, you transferred cash from the 401k to your
checking account. As you repay the loan, a portion of your net pay will go
to the loan rather than your checking account. I presume that there is also
some interest expense. It would get reported as an expense within the 401k
which will offset the dividends from the mutual funds.
I hope that this helps you set up the accounts.
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