best way to track t-bills

Just the way the Help files suggest.

Make up your mind ... Notes or Bills.

Notes are interest bearing.

Bills are discounted.

EXTREMELY different animals

Both.

I don't know the *best* way but I use a method for tbills that keeps the account balances in agreement with both the treasury statements and the source banks.

My way involves using an investment account and buying the bill as though it were a bond using the actual price paid. I then add a misc cash offset to bring the account balance up to par.

At maturity I sell the tbill at it's purchase price (not par), post an income payment and remove the original offset. Using the return-of-capital function seems logical for this but my recollection is the cash balance does not change as it should.

I found Quicken's help to be too vague to be of much value. Perhaps an accountant will advise us on the best way.

Your way is as the Quicken help process recommends IIRC.

With regard to T-Bills, the question becomes one of mechanics ... i.e., in what manner did you purchase the instrument.

If you bought it thru a bank or brokerage, they probably only charged you the discounted value (and, probably, a commission). In this case, just create the new security (don't re-use prior T-Bill securitys ... it just gets messy), and execute a buy. When it matures, record an Interest Rec'd and a sale at the original value -- so that the 2 amounts sum to the face value of the T-Bill.

Where it gets weird is if you participate in the "Treasury Direct" program (or, if your bank does so on your behalf). In that case, you pay the face value up front and, upon purchase, the Treasury refunds the part it didn't need for the purchase. Except this amount is exactly the same as the interest you'll eventually receive at maturity.

I believe that the simplest way to record this is to post the initial amount (i.e., the face value) to a receivables account and then, once you receive the actual amounts, record it exactly the same as I stated above (using the receivables account as the source of funds for the Inv purchase). When you receive the refund check, just record it as a deposit to your bank from the receivables.

Is a "return of capital" taxable? Why not show the refund as that?

It's probably a matter of definition as much as anything. Since the refund was, technically, never invested, I wouldn't use ROC.

I set up a separate Treasury Direct account and have the discount amount direct deposited to my checking account.

When I buy a new T-bill I transfer the face value into my TD account then enter the following 4 transactions:

Buy Tbill @ Xout to checking account Sell Tbill @ IntInc

If I reinvest the T-bill I create a new T-bill security whose purchase date is the maturity date of the old T-bill and enter the same 4 transactions for the new T-bill.

If I don't reinvest I Xout the on the maturity date.

This method records the investment income as interest earned on the maturity date of the T-bill, which is per IRS specs.

Jerry, That's an elegant variation on what I was proposing.

And one that makes MUCH sense, since the "Treasury Direct" account IS it's own investment account (that's held at the Fed instead of being held at one's bank or broker).

Dan