Hello,
I have a number of situations where I view a transaction as simultaneously
an "expense" and a transfer to an asset (or liability) account, and I'm
wondering if anyone else has this experience and likes their solution.
Example 1: when my hot water heater broke, I took the opportunity to
upgrade to a tankless model. According to the tax code, the difference
between what a replacement of the original would have cost and the actual
amount I spent on the new unit gets to be added to the cost basis of my
house. But outside of doing my taxes, I pretty much consider this to be an
expense. I currently have it booked like this:
2019-09-01 * "Some Plumber" "tankless HWH parts & installation"
Assets:Checking -5000 USD
Expenses:House:Contractors 500 USD
Expenses:House:Appliances 500 USD
Assets:House:Capital-Improvements 4000 USD
but then when I look at my income statement, it looks like I only spent
$1,000 on this project when I really spent $5,000. The tax man may
(eventually) care that $4,000 went to improving my home's value, but I
don't.
Example 2: when I pay my mortgage, I recognize a small interest expense and
a large principal payment as a transfer:
2019-10-01 * ""
Assets:Checking -4500 USD
Expenses:Mortgage:Interest 3000 USD
Liabilities:Mortgage 1500 USD
If I care about changes in my net worth, this makes perfect sense. But if
I'm trying to budget, I need to know my actual cash flow, not my P&L; if my
income is enough to pay off my real expenses but not my real expenses plus
my principal payments, I'm in trouble. I don't have a good way to model
this at all.
Example 3: I have a donor-advised fund that I use for tax arbitrage of my
charitable giving. When I move securities into the DAF, I am making a
transfer from one asset account to another, but for tax purposes it would
be very helpful to collect everything that's deductible as charitable
giving into a single account. What I do now is:
2019-12-01 * "Transfer of appreciated securities to DAF"
Assets:Brokerage:STOCK -100 STOCK { 2015-03-04 } @ 100 USD
Income:Brokerage:STOCK:Capital-Gains:Non-Taxable
Expenses:Charitable-Giving 10000 USD
Income:DAF:Contributions 10000 USD
Assets:DAF 200 DAF { 50 USD }
This works, but it means I have a phantom Income account to ignore in my
income statements, which is kind of weird.
How do you all handle these types of situation in your accounting and
reporting?
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