Double-Entry Accounting Question

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1

Thanks @teetertim3 for that flash back to Peachtree Accounting. Used it in the late 1990s! :grin:
I am a retired accountant, so double-entry accounting is second nature. Looking for ideas on how folks use/categorize lump sum payments that are paid out on installment.

Iā€™m using all the Sheets @blake mentioned above except for New Worth Snapshot ā€¦ will check that out.

Example #1: New Roof - consider these receipts and payments spread out over 3 months.

   Mnth 1:  Initial rcpt from Insurance Co      $16,000
   Mnth 2:  Down pmt to Roofer                 -$20,000
   Mnth 3:   Final  pmt to Roofer              -$ 7,000
   Mnth 3:  Final rcpt from Insurance Co        $ 8,000
                Net Cost to me                  $ 3,000

Currently categorized as Home Improvements (both income and expense in one category). Monthly Analysis shows wild swings as lump sum of income is received ($16,000), followed next month by large payments to roofing co ($20,000), etc.

In the end, no asset is booked for the $3,000 Home Improvement - a cost you want to keep track over multiple years in case you sell your home to add to cost basis.

Is there a way that ā€œHome Improvementā€ category can be an Asset, versus an Expense? Deposits would go into this ā€œAssetā€ account, as well as the Payouts. Net Balance in Assets would be $3,000. No expense would be booked.

Example #2 involve how to categorize large purchases on longer payment plans, like a 20-month 0% deferred payment plan. This could be another Home Improvement asset, or Furniture purchase.

In double entry world ā€¦ First book the asset purchase, with an offsetting liability (i.e., credit card):

          Asset             $13,100
              Liability               $13,100

Monthly the 20 payments are coded as:

            Liability            $655
                Checking                   $655

After 20 months, the Liability (i.e., Cr Card) is zero with the Asset remaining. Your Cash has been reduced by $13,100 over time.

Currently in Tiller, I booked the $13,100 as Home Improvement expense in July 2023 and the $655 monthly payment from Checking is coded as ā€œCC Paymentā€ as well as the payment imported in the Credit Card account - thus only one month was impacted for expense - July 2023. CC Payment Category shows zero monthly. Yet my monthly cash flow out is currently elevated by $655 per month until this pays off.

(While CC Payment is in Categories, it does not show on Monthly Analysis. Iā€™m assuming that Transfer Types are hidden by default?)

Since retired, itā€™s more important to see the Cash Flow monthly and also keep track of the Asset long term for cost basis.

Any ideas on how to code this better to achieve in Tiller? Thanks in advance for any feedback.

2

Great question @RonH ! Iā€™ve moved your question here to a standalone topic. Iā€™m linking the feature request here. Hoping someone in the community has some suggestions for you.

3

One way Iā€™ve dealt with this is by

  • categorizing the initial expense as, e.g., home improvement, as you suggest, but
  • rather than categorizing the subsequent monthly payments as generic credit card payments, I use another expense (not transfer) category, e.g. ā€œother loan payments.ā€

Show/hide the category as needed for the reports you use.

4

Thanks @rhowell. Iā€™ll try that out.