Marilyn,
This does complicate things a bit, but your concept is still doable.
Warning: Long Read Ahead
If you don't want to create another real-world 3rd (or more) account(s)
at one of your financial institutions, you can still track this
virtually, and maintain sanity for reconciliation of both Checking and
Savings, with a bit of extra work.
The idea is to create a new tree or sub-tree of accounts for your
Fund(s). The option will be where to put it. The mechanics are the same
regardless of this choice.
Since you are co-mingling virtual earmarks from separate real accounts,
you'll need some extra virtual accounts to keep everything balanced.
This will also necessitate extra transaction splits for each and every
transaction involved with this virtual tracking.
* — for clarity, I'll be using the proper noun 'Fund' to refer to the
'virtual entity' that you want to work with, not just generic 'money'.
You probably don't need sub-accounts of Checking and Savings for each
Fund in this case, just a single 'Checking:Fund Contribution' /
'Savings:Fund Contribution' under each or something similar. This will
allow you to deduct from the account(s) while retaining the ability to
see roll-up balances and conduct a reconciliation without mental
gymnastics. You will be able to see at a glance how much you have
earmarked from that particular account, as well as the non-earmarked
balance that remains in the parent available to spend.
As long as this is for personal use (without tax/legal documentation
requirements) then you can structure your book however you like, but
there are reasons for 'best practices'. Accounting texts and online
resources can help here. Find a good personal chart of accounts example
and try to model that. Look at several examples as some will include
more detail and explanation than others. (you can of course always get
professional CPA advice, and if this is for a business, I'd strongly
recommend it!) Those examples probably won't include 'virtual tracking'
but they are good for the 'real' accounts you should have.
First, I'll outline the account organization options, then I'll go over
the entry procedure.
-----
Option 1: Assets
Every new account you create should be of fundamental type 'Asset'.
You'll need to create a new parent account for all of your various
earmarked Funds, e.g—
Assets:Current Assets:Earmarks
It should be under Current Assets since it is liquid. (it is technically
not different than Checking or Savings, which are current assets)
Mark this account as a placeholder.
Create a sub-account, called perhaps 'Funds'. (maybe not the best word,
because it could be confused with another GnuCash account type, but use
what works for you) Also mark it as a placeholder.
Assets:Current Assets:Earmarks:Funds
Now, create sub-accounts for each Fund you want to track.
Assets:Current Assets:Earmarks:Fund:Fund_1
Assets:Current Assets:Earmarks:Fund:Fund_2
Assets:Current Assets:Earmarks:Fund:Fund_etc
You'll need one more virtual account for balancing. Make this a
sub-account of Earmarks.
Assets:Current Assets:Earmarks:Balancing
(It doesn't really matter what you name this, it is just for
double-entry. It has no other purpose or meaning really.)
-----
Option 2: Equity
Same as above in all respects, except make these accounts all of
fundamental type 'Equity'.
Place them higher up the tree like so:
Equity:Earmarks
Equity:Earmarks:Funds
Equity:Earmarks:Funds:Fund_1
Equity:Earmarks:Funds:Fund_2
Equity:Earmarks:Funds:Fund_etc
Equity:Earmarks:Balancing
-----
Option 3: New Top Level
Same as above, but the fundamental type can be either 'Asset' or 'Equity'.
This would look like:
Earmarks
Earmarks:Funds
Earmarks:Funds:Fund_1
Earmarks:Funds:Fund_2
Earmarks:Funds:Fund_etc
Earmarks:Balancing
(some people do this and call the Tree 'Budgeting' or 'Envelopes', etc.)
I suppose this could also be considered (or as Option 4) as type
'Liability' as some people may think of these Funds as being something
they have pledged.
*note — You can have (as far as I know) as many 'Top Level' accounts as
you like and name them whatever you like. But they *should* be one of
the fundamental types (Asset, Liability, Equity) and definitely *not*
one of the special business types. (Accounts Receivable/Payable) Some of
the other special GnuCash types (Cash, Bank, Fund[Mutual Fund], Credit
Card, Stock, etc.) might be possible, but I've never tried them or seen
if that is at all recommended.
-----
Entry Procedure
===============
Step 1: Earmarking
------------------
As noted before, as you calculate the contribution(s) you want to
earmark, make a transaction between the source account and Fund
Contribution sub-account like so:
Dr. Checking/Savings:Fund Contribution
Cr. Checking/Savings
This will now show the 'available' (to you) money left in the respective
parent, as well as how much you've earmarked from each.
Here's the virtual part:
Now either as part of the same transaction (recommended) or separately,
you need to involve the Fund(s) and then the Balancing account.
So as an all-in-one:
Dr. Checking/Savings:Fund Contribution
Dr. Fund_1
Dr. Fund_etc.
Cr. Balancing
Cr. Checking/Savings
Or separately:
Dr. Fund_1
Dr. Fund_etc.
Cr. Balancing
Putting all the splits in a single transaction will clearly show you
what money was earmarked to where, from where, and when. Doing separate
transactions can still show the same info, just not in one place as it
all occurred. (remember what I mentioned about 'modeling the
real-world'?) The earmarking is occuring all at once and that is the
entire purpose of the original transaction, the extra Fund splits are to
facilitate your tracking. They aren't a separate event.
Now, in the Earmarks part of your tree (wherever you put it):
*The balance of Earmarks will be zero. (Funds - Balancing)
*The balance of Funds will be the sum of the child Funds (the total
amount earmarked from both Checking and Savings)
*The balance of each child-account Fund will be the amount you've
earmarked there.
*The balance of Balancing will be the same as Funds but negative.
There are no 'Opening Balance' entries in this method. Each amount
earmarked needs to also have a corresponding activity between the
Checking/Savings and Contribution accounts. If you already have some
funds earmarked, you should have those original transfers from
Checking/Savings to Contribution accounts and then you can add-in the
Fund_etc/Balancing splits.
Step 2: Spending
----------------
Again, for future sanity, try to model the real-world.
Since the funds are coming from either Checking or Savings, that's what
the core transaction needs to look like:
Dr. Expenses:(whatever relevant)
Cr. Checking/Savings
But you took those funds out, so they need to be put back in first
(ideally):
Dr. Checking/Savings
Dr. Expenses:(whatever relevant)
Cr. Checking/Savings
Cr. Checking/Savings:Fund Contribution
You *could* spend directly from the virtual Contribution accounts for
less typing:
Dr. Expenses:(whatever relevant)
Cr. Checking/Savings:Fund Contribution
Now you also need to reduce your Earmark accounts:
Dr. Balancing
Cr. Fund_(whatever relevant to match the expense)
As with Step 1 above, I'd probably include those Earmark splits as part
of the original transaction.
Dr. Checking/Savings
Dr. Expenses:(whatever relevant)
Dr. Balancing
Cr. Fund_(whatever relevant to match the expense)
Cr. Checking/Savings
Cr. Checking/Savings:Fund Contribution
-----
Reconciliation
==============
If you spend directly from the Contribution accounts, when reconciling
the Checking or Savings accounts, tick the box to 'include sub-accounts'
proceed as normal. If you instead first return the money to the main
accounts, you do not need to do this, just reconcile as normal as all
real transactions are in the parent account.
-----
Reporting
=========
The P&L (Income Statement) and Balance Sheet should all operate as
normal. For the Balance Sheet, be sure to *not* include any virtual
accounts (earmarks) but *do* include the Contribution accounts as
otherwise your assets will be understated. The P&L only involve Income &
Expense accounts and since you only touched those in real transactions,
that report should still look as if you didn't do any virtual tracking
at all.
You can now craft interesting Transaction reports on the Contribution
and Earmark accounts as desired.
If your Earmark tree is of type Asset or Liability, you can involve
those reports. (like various Charts) If you choose type Equity, you
won't be able to do those reports without exporting something like a
Transaction Report to a spreadsheet and creating charts or custom layouts.
-----
Advanced Entry
==============
If you earmark money regularly(like weekly or monthly), and you do so
according to a set formula (10% to Fund_1, 13% to Fund_2, etc.) then you
can set up a Scheduled Transaction(SX) using a custom variable.
For the template of this SX, put the splits between source and
contribution accounts as 'n*profit' or something similar, e.g—
Dr. Checking:Fund Contribution 0.65*profit
Dr. Savings:Fund Contribution 0.35*profit
Cr. Checking 0.65*profit
Cr. Savings 0.35*profit
Then each Fund would be, e.g.—
Dr. Fund_1 0.10*profit
Dr. Fund_2 0.13*profit
Dr. Fund_etc. 0.77*profit
Cr. Balancing 1*profit
But this would all be one big transaction.
Set the SX to remind you and auto-create as desired. When the SX fires
on the scheduled date, it will prompt you for the value of the 'profit'
variable and do the math accordingly, entering the earmarking
transaction with all splits for you. Be sure to also check the option to
review the transaction before it is created. This way, you can tweak
amounts as desired.
*tip – Do the Earmarking manually once or twice though to fully grasp
the process, then you can right-click one of those transactions and turn
it into a Scheduled Transaction and adjust with your formulas.
*hint — I've used this to auto-allocate a paycheck to budgeting
'envelope' accounts.
-----
Hope that helps!
Regards,
Adrien
p.s. — yes to anyone wondering, I do plan to write this up on the Wiki
(more generally as 'virtual tracking') but I have some other Wiki
projects pending at the moment. I'll post back to the list when it is up.
On 8/7/20 6:11 AM, Marilyn Graves Kimple via gnucash-user wrote:
I thank you all for your suggestions, and this sounds like the simplest. These are indeed
"virtual" accounts; the only problem is that they include funds from both my checking &
savings "real-world" accounts. Maybe I could set them all up under savings and show a
'virtual deficit' which would represent funds that are actually in checking?
I tried making sub-accounts under the Equity>Opening Balance and entering
initial amounts for my virtual accounts backwards so they would show up as
negatives (part of the opening balance), but of course I could not write a check
and credit the amount to both checking (asset) and a virtual account, so that did
not work.
I miss my old (ancient) program, where I could set up equity accounts as
"funds", allowing me to post to them as I would income or expense accounts.
How do others use Equity sub-accounts? Do they have to correspond to a
"real-world" account?
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