Chris Shoemaker <[EMAIL PROTECTED]> writes: > A cash budget is probably what you think of when you think "budget".
Hah. I think of both. :) > Google can provide formal definitions if you like, but your intuition > is probably good enough. Note: I didn't use the term "expense budget". > Thomas did, and I don't know exactly what that means, but he's right > that there's more than one type. I use a modified accrual method for my own finances, which is essentially a cash-basis accounting with particular transaction types counted on an accrual basis. I have some assets which are not cashable nor fixed, for example, my prepaid starbucks card, multi-ride rail tickets, and the like, for which the purchase of the asset is not recorded as an expense, but as an asset transfer, and then I only count the expense as I spend down the balance on the card or use up the multi-ride tickets. My expense budget simply counts all the expense accounts in my bookkeeping; it is convenient to use exactly the same budgeting categories as I have expense accounts. More complicated organizations do not normally treat budgeting categories and accounts so closely. The expense budget (really it's an income/expense budget) predicts my expenses. Paying the car payment is an asset/liability transfer and an income expense payment; the expense budget only counts the latter of course, because only the latter is an expense. The expense budget (since it's really an income/expense budget) also predicts income for the year, which again is arranged just the way my income accounts are. I count my tuition waivers as income, and the tuition for which they pay as an expense. This is more sensible for me, because I get the waiver if and only if I work as a TA that term, which doesn't happen every term. The cash budget is then a different beast. I could do it ground up, but instead it cribs figures from the expense budget. This works well because I am a simple case. So I consider annual cash credits and debits. My cash debits are my total income plus any loans I plan to take out. (Strictly speaking, if I receive income which is noncashable, and I don't expend it that year [a starbucks card, which I receive as a gift on Dec. 25, for example], I should also subtract from cash debits, but the amount of these are negligible in my case.) My cash credits are my expenses, minus those expenses which are not paid from cash assets (for example, depreciation on the car, capitalized student load interest, and so forth), plus additional cash payments (debt retirement, asset transfers). The cash budget tells me a net cash flow for the year, which has no necessary relation to the net gain/loss for the year. I can then budget cash month-to-month. I track the exact month my income and cashable loans come in, because they are quite irregular (being a student and all), but I make the simplifying assumption that the cash credits are paid out one twelfth in each month. I can then know what my projected cash balance is at the beginning and end of each month. Some months will end with a negative cash balance; in those months my credit card balance will be higher than my cash in the bank. This system lets me know at a glance how much credit I will need to have available at which times, which is convenient. Consider my auto loan. I have an asset: the car. I depreciate the car (never mind how I do it; it's nothing like the IRS rules, but it suits me). Each time I depreciate the car, that's an expense from the fixed asset account to the car purchase expense account. I have a liability: the auto loan. Note that once the loan is set up, there is no futher relation between the accounting for the car and for the loan. Each month I make a car payment; most of that retires the loan, and is a transfer from cash to the auto loan liability. Some is interest, which is an expense. The annual expense budget does not see the debt retirement at all, because it is simply not an expense. I estimate the total interest I will be paying that year (no need for it to be exact, so I don't bother with careful precision) and enter that on the expense budget. For purposes of tracking cash, however, I certainly had better keep track of the debt retirement portion too! That's why I have a cash budget. So the cash credits section of the cash budget starts off with "total expenses", and then adds to it "auto loan debt retirement". This number is simply the total annual car payment my bank expects (I know this exactly) minus my expected interest payment. Note that errors in the expected interest payment, do not affect the cash picture at all; if I predict too much interest expense, I will predict correspondingly less debt retirement, and the sum of the two will remain constant. Thomas _______________________________________________ gnucash-devel mailing list [email protected] https://lists.gnucash.org/mailman/listinfo/gnucash-devel
