It doesn't have to "break double entry", it doesn't require partitioning
the actual asset account holding the funds.
Those are only issues IF you want to have "envelope budgeting" without
extra work when entering transactions. It might help if people wanting
envelope budgeting look at our discussions involving organizations and
legal/moral restrictions on fund use. It is a related problem.
Thus, the Board of the organization has voted on its budget, X amount
for purpose A, Y amount for purpose B, etc. What does the treasurer have
to do to track that the organization is following that budget? Have the
information ready to hand to authorize of refuse a proposed transaction?
<< again, I will point out that no bookkeeping method can ENFORCE that
>> Or the organization might have received a grant amount Z to be used
for purpose C.
In other words, in addition to entering a transaction "y" amount spent
for expense "b" affecting what is in the bank account and in the expense
category B it ALSO has to affect how much remains in the budget for B.
It will not be a simple transaction. It will be a split. Thought will be
needed setting up the CoA. I will give an example for the grant. I might
have set up an income account "grant income" and a liability account
"unused grant funds" << like an "envelope" in one way and in another not
>> When the money arrives, debit the bank account and credit the
liability (it is all unused). When paying an expense that qualifies (for
the designated purpose) debit the expense AND "unused" while crediting
the bank account and grant income (it becomes yours by using it). I said
"in another way not" because in this case not limited to using funds
from the "envelope". But if this were a town budget, voted in town
meeting, yes, those are the only funds that could be used.
Michael D Novack
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