On Wed, Jul 28 2010, Peter Ross wrote: > On Thu, Jul 29, 2010 at 2:48 AM, spiffytech <spiffyt...@gmail.com> wrote: >> I'm unclear on how I should record tithe and taxes when I get paid. >> Neither are paid yet, so I don't want to put them in Expenses. This >> really applied to any sort of "setting money aside" scenario, but >> tithe and taxes are the boat I'm in right now. >> >> I've thought of a couple ways to handle this, but neither is >> satisfactory. Can anyone suggest a better solution? Am I missing >> something obvious (I'm new to both double-entry and rigorous personal >> accounting)? Or am I just being to picky about what my journal looks >> like? >> > You are trying to do cash based accounting, I find it much easier to > do accrual based accounting.
This is something I've been wondering about for a while, thanks for explaining these different approaches so thoroughly! Now if you could just do the same for college loan accounting... E > > From > http://www.allbusiness.com/accounting-reporting/methods-standards-cash/1308-1.html > > Cash-based accounting recognizes income when money is received. > Accrual-based accounting recognizes income when goods are shipped or > services are rendered. Under the cash method, an expense is recognized > when it's paid. Under the accrual method, an expense is recognized > when the business is obligated to pay it. > > Thus for accrual you recognize the expense of tax and tithe the > instant you receive your paycheck, but as you've yet to actually pay > it you add it as a liability, giving you the following transaction > (assuming 10% tax and 5% tithe) > > 2010/01/31 Salary > Assets:Bank $1000 > Income:Paycheck -$1000 > Expenses:Tax $100 > Liabilities:Tax -$100 > Expenses:Tithe $50 > Liabilities:Tithe -$50 > > Or as an automated transaction. > > = /^Income:Paycheck/ > Liabilities:Taxes 0.1 > Expenses:Taxes -0.1 > Liabilities:Tithe 0.05 > Expenses:Tithe -0.05 > > > 2010/01/31 Salary > Assets:Bank $1000 > Income:Paycheck > > Thus at any instant you can now determine how much tax you've actually > paid in cash to date (expense minus liability), how much expense you > would have to pay today (liability) and how much you've meant to have > paid as of today (expense). > > So hopefully you can see the accrual system allows you to look at your > position in any number of ways, while doing the cash based system is > actually much more difficult. > > Hope that helps, > Pete
