đ You beat me to the punch on a couple of things. Yes, I have the tendency to over-complicate. I think there needs to be a simple way to do what people want though...
I started plotting things out more and came to similar conclusions. First, when I say âfakeâ I mean ânot corresponding to physical money â cash, account balance etcâ. Youâre right, its bad terminology, and I like the way you think of accounts as just a âthingâ. Second, I have tried a number of other programs for my financial needs. All of them have various advantages and disadvantages. So with no clear winner, I thought Iâd try to make GNUCash better... âCategoriesâ is a vague word and risks things getting complicated. Perhaps all of this allocation of money concept would work best if GNUCash introduced âcategoriesâ purely for allocation? Applications where we are allocating things on the side without actually changing our accounts? Lets keep that aside and see if it works once we agree on everything else â sounds complicated (and I cringe at adding a new âsemi-accountâ type). Thinking about things further (and trying it) I agree 100% that liabilities arenât involved. Allocating money to something decreases the amount of cash (agree with your term â LET âcashâ = âliquid assetsâ), which would correspond to a decreased liability... Makes no sense having negative liabilities. My bad. I tried fiddling with equity as you (tentatively) suggested too, but this didnât really make sense either. You end up with negative equity accounts showing how much you have to spend... So yes â I agree It is asset to asset... Decreasing cash available (asset) is balanced by increasing cash to spend on a purpose later (asset). Creating a sub-account to your physical cash or bank account to track allocated money is only good if you are always going to spend out of that account. If Iâm tracking my spending money from my bank account, but then spend out of my cash on spending money... Dr increase Expense Cr decrease physical cash I used to pay Cr decrease the amount in that sub account â gets it out of that sub account.... Dr increase the amount in parent account â puts it back in the parent... It works, I guess, but just seems weird transferring balance between the child and parent like this. So they way Iâm thinking of trialling is having a separate asset account âAllocated Assetsâ (separate from Current and Fixed assets). That way when allocating money the decrease (cr) in current assets (an account Iâve put as âMoney Allocatedâ) is balanced by the increase (dr) in the specific âAllocated Assetsâ:âSpending Moneyâ account. Spending is the same as above, but the increase to make âMoney Allocatedâ less negative is balanced by the decrease in the relevant Allocated assets account.... Of course, all of this still means iâm entering four lines for one expenditure. The good news is that I only really have four accounts that involve allocated money like this (2 spending money, Holiday, and restaurant/cafĂ© spending). Since all of this is a very common application for most personal users, Iâm wondering if there is an easier way â âcategoriesâ defined against an expense account that just track how much you have âallocatedâ to that purpose? Would need both aspects â viewing âhow much I have leftâ to spend for that purpose (budget line item?), but also ensuring âI have the money in my accounts to be able to buy itâ. That all sounds too complicated â it would be easier to allow the user to tag an expense account, and have GNUCash automatically maintain the necessary âAllocatedâ asset accounts... I donât think I am overthinking too far though, purely because it seems like a common thing people want. Hence, solution required... Philosophy of accounting tells us that this kind of allocation is: double entry on Asset/Asset when allocating, two double entries (Asset/Expense and Asset/Asset) when spending. Hmmm.... Same conclusion as before â Iâm going to try it out for a while before suggesting any program changes... Thanks and regards, Matt From: Adrien Monteleone<mailto:adrien.montele...@gmail.com> Sent: Friday, 26 January 2018 4:32 PM To: GNU Cash User<mailto:gnucash-user@gnucash.org> Subject: Re: Future allocated money vs Budgets Hereâs my attempt to save you a few months⊠I think youâre spinning wheels into something more complicated than it needs to be. For starters, thereâs no reason any liability account or expense account should enter the picture of âsavingâ for any particular purpose. âSpending Moneyâ savings is NOT an expense. Why would anyone think to record it that way? An expense is when you actually receive something of value and you owe someone else in exchange. (goods or services) If you pay for those goods or services at the same time you receive them, you just record the expense. If however, you receive the goods or services and then pay later - an accrued expense - then you use a liability account to track what you owe. (you still record the expense when you receive the goods or services) If you pay for goods or services *before* receiving them, itâs not an expense yet. (a deferred expense) Itâs a shift from one asset, likely 'cash', to another asset called 'prepaid expenses.â (cash is generic for liquid assets, this includes checking and savings) When you actually use that asset, that is, either receive the service or the goods, then you record the expense. (youâd also do this for other assets you acquire and use up later - like supplies. Depreciation is an example of a deferred expense for special assets you paid up front for but use up slowly) If however, youâve not received any goods or services, and you donât know if you actually will and havenât yet paid for them, then expenses and liabilities arenât even in the picture. All you are doing is segregating assets for informational purposes. (the practice of âenvelope budgetingâ fits this model) The only accounts involved are asset accounts. They arenât âfakeâ any more than any other account in your books is fake. If by âfakeâ you mean they donât correspond to a real world account held at some institution then that goes for nearly all accounts in your ledger save a small handful. (unless you are quite the prolific banker, borrower, investor or credit spender) The point of accounts is to track where money comes from and goes to. Some of those accounts *might* have real-world counterparts, but they are all no more ârealâ or âfakeâ than any other. Accounts are âreasonsâ, not physical things. (note, âaccountâ is not some special term. You have an âaccountâ at a bank, because they created one in their books to track the money you gave them. They have lots of other accounts on their books that donât correspond like you think they do. Your âaccountâ at your bank is simply their âreasonâ for having money that doesnât belong to them.) I might draw the ire of those wanting to have GnuCash stand apart from Intuit products, but basically, your Chart of Accounts is just a Chart of Categories, Chart of Classifications, or Chart of Reasons to be more accurate. It is a system of classification. Donât think even of âaccountâ as a thing, itâs a really a verb in this sense - you are âaccountingâ for why something is or why it happened. For the purpose of planning expenses, the GnuCash budgeting module can help. (certainly, it is limited and needs improvement) For the purpose of putting money aside or segregating it so you donât âaccidentallyâ spend it, thatâs just financial discipline. Some people find that they can utilize sub-accounts or special savings/asset accounts for this purpose to âhideâ the money from themselves. This can cause a mess with reconciliation though. Budgeting is the process of planning your expenses. Saving is the process of not spending. The two are not the same thing. (but certainly one influences the other) Using sub-accounts or other asset accounts has the advantage of being able to see how much youâve saved, but not how much you have left towards a goal. I suppose one could get creative with equity accounts in this regard, but it might be more work than necessary. (I hesitated to even mention it) Certainly a special set of âsavings goalsâ liability accounts could be used as well, but there again, this is confusing the issue of what a liability really is or isnât. Your balance sheet would be all out of whack. (unless you donât care) With the envelope method, you arenât creating liabilities by saving. (even negative liabilities!) Youâre just taking some of your assets and putting them inside envelopes. Those are still assets. They donât change their nature because of the envelope. You donât suddenly have this not-quite nefarious non-expense or imaginary negative debt. You just separated your cash to keep it out of your wallet so you can pay your bills, buy gifts, make charitable donations, or have a small savings to cover emergencies instead of splurging on impulse buys or going out to dinner instead of cooking. What you have are assets that you want to earmark, at least temporarily and not even by hard and fast rule necessarily. You really donât *owe* that money to anyone. So I would just use asset accounts. No extra complicated transactions. No contra-balanced liabilities. Your assets are always correct. Your liabilities are always correct. You only become confused as how complicated you make the process. (how many âenvelopeâ asset sub-accounts you create and where you put them) Iâm also probably going to draw ire by suggesting another software package as a better fit for this purpose. (at least at this stage of GnuCash development) Certainly, some people have managed to finagle an âenvelopeâ method using special accounts in combination with either manual or scheduled transactions. (which are somewhat limited for the purpose) Most likely, if you really want to stick with GnuCash, youâd have to set up a spreadsheet to handle the envelope part, at least the calculations as to how much to segregate at each opportunity and keep track of any goals. But Iâd proffer that something along the lines of MoneyWell is more suited to the task, especially for those who live from a checking account. As far as I know itâs Mac only however. (there are mobile versions, but I donât think they are stand-alone) For those who handle a fair amount of cash, or want to track investments and asset values, or need to track A/P and A/R, GnuCash is better suited. MoneyWell was designed specifically to implement the envelope method (using âbucketsâ) to automatically âflowâ money you receive to targeted purposes such as your utilities, rent, car, savings, etc. Iâve played with it quite a bit, and Iâd like GnuCash to have something similar, but I find it too limited for all my other accounting purposes. If there were a way to get transactions in and out easily, I might use it for daily purposes and budgeting and keep GnuCash for the overall big picture stuff. Regards, Adrien > On Jan 25, 2018, at 9:29 PM, Matt Graham <matt_graham2...@hotmail.com> wrote: > > Hi All! > Iâm going to discuss (and get peopleâs opinions) on a way in which many users > (myself included) struggle to get âwhat they wantâ from GNUCash budgeting. > GNUcash is very strict on proper double-entry bookkeeping practices (which I > love). In accounting, âbudgetingâ means that you are plotting out exactly > when you are going to change account values in what way. It is forecasting > the future states of the accounts. > > So if you have a monthly bill of $50 you need to pay â easy. You enter it > into the monthly periods - both expense account and asset account. You know > you will spend that amount, and you (usually) know what asset account you are > spending it out of. This is budgeting, and allows you to see that you are not > losing money overall and sending yourself broke by end of year. > > The next thing that people call âbudgetingâ is when they want to save up for > something, but donât have a distinct plan of when it will be spent or how it > will be paid for. My example is âSpending Moneyâ (but perhaps âholiday > savingsâ is a better example). I allocate $100 every month to myself and my > wife to spend as we want (hobbies, clothes, etc). If we donât spend it, it > builds up allowing us to buy bigger stuff later. So I should put $100 in each > budget period against those two expense accounts, right? NO, NO, NO!!!! From > an accounting perspective, nothing is necessarily going to be spent out of my > âSpending moneyâ expense account. It is an allocation of money, not a > spending of money. I canât predict in advance any real changes to my asset or > expense accounts from this monthly âallocation of moneyâ. What I am doing > from an accounting perspective is setting up a liability on myself â a > promise to give money later to someone (in this case a promise to give money > to myself). The reduction in my assets (cash) is as completely fake as the > increase in liability â none of my cash or credit accounts have changed in > value. > > For now Iâm going to call this application âFuture allocated moneyâ, and > controversially say that it is NOT âbudgetingâ. > > So if you have some âbudgetâ purpose such as this, and lament that GNUCash > canât give you the running total, the way to deal with it is the way this > person describes: > https://nam01.safelinks.protection.outlook.com/?url=http%3A%2F%2Fallmybrain.com%2F2008%2F12%2F15%2Fbetter-budgeting-with-gnucash%2F&data=02%7C01%7C%7C2d1add0a2c6a4643591d08d5647e306d%7C84df9e7fe9f640afb435aaaaaaaaaaaa%7C1%7C0%7C636525415498305568&sdata=s61s%2FSFcqv5L1C0v2xEma0%2BbaPC4eQl2EyPXGHLgTcc%3D&reserved=0 > > The fake asset account is used to show the money that has been allocated for > certain purposes in the future (ie is unavailable). It needs to be a fake > account, because usually we donât know in advanced which asset account we are > going to spend the allocated money out of. If you know which asset account > you are going to be spending the money out of, then sure you can just create > a sub-account to record the amount allocated to this. In this case, you donât > really need to record the liability at all (the liability is effectively > shown in your sub-account), and the transactions become easier â just > transferring between that sub-account and the actual expense account when you > spend. But for most people, you need a fake asset account because you donât > know in advance which account you will spend out of. > > The fake liability account is your running amount you can spend at any time. > > <b>The problem in doing this?</b> > It creates extra transactions that look really complicated. Allocating the > money is one fake transaction involving the fake âasset budgetedâ account and > the âfake liabilityâ account (and in the website they allocate money from a > pay packet rather than periodically, so it involves the real income and real > asset account too) . Spending money against a category affects the expense > account, the asset account, the fake liability account, and the fake âasset > budgetedâ account... Looks confusing at first until your head gets around it. > > <b>So how can we make all this easier on people?</b> (both to understand and > then to implement)? It is a pretty common thing to do. > Perhaps having some way to mark an expense account as âfuture allocated > moneyâ based, and having the program automatically create the necessary fake > liability and asset accounts? And perhaps any expenditure recorded against > that expense account would be auto amended to include the effects on the fake > liability and fake asset account? > > I think Iâm going to try all this for a few more months (and await your > thoughts!) before coming up with a proposal. > > Thanks and regards, > > Matt > _______________________________________________ > gnucash-user mailing list > gnucash-user@gnucash.org > https://nam01.safelinks.protection.outlook.com/?url=https%3A%2F%2Flists.gnucash.org%2Fmailman%2Flistinfo%2Fgnucash-user&data=02%7C01%7C%7C2d1add0a2c6a4643591d08d5647e306d%7C84df9e7fe9f640afb435aaaaaaaaaaaa%7C1%7C0%7C636525415498305568&sdata=Rr7f0f3uZTy64eI9JuoAdLPJiisfP7VJ7TpCbSFYLCs%3D&reserved=0 > ----- > Please remember to CC this list on all your replies. > You can do this by using Reply-To-List or Reply-All. _______________________________________________ gnucash-user mailing list gnucash-user@gnucash.org https://nam01.safelinks.protection.outlook.com/?url=https%3A%2F%2Flists.gnucash.org%2Fmailman%2Flistinfo%2Fgnucash-user&data=02%7C01%7C%7C2d1add0a2c6a4643591d08d5647e306d%7C84df9e7fe9f640afb435aaaaaaaaaaaa%7C1%7C0%7C636525415498305568&sdata=Rr7f0f3uZTy64eI9JuoAdLPJiisfP7VJ7TpCbSFYLCs%3D&reserved=0 ----- Please remember to CC this list on all your replies. 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