Official Categories of the Accountant

A) There is NO "Official List" of categories (or, accounts)

B) I could not possibly disagree with you more about any alleged need for one.

I'm self-employed, so I need tax-related categories that are pertinent to my situation. Common categories such as "Employer 401(k) Contrib" or "Federal Income Tax Withheld" are, simply, not relevant to me. Nor is "State Income Tax Withheld" since my state, Tennessee, doesn't tax earned income.

And if I want to call one category "Mortgage Int" instead of "Mortgage Interest", WHY SHOULD ANYONE CARE???

Also, some are married, others not. So why should one group have a bunch of useless marriage related categories (e.g.; Income - Wife, or Income - Husband)? Or, why should the other group need to "violate" to official list by adding these?

The remedy to your plight is to print out your current category list (using Control-C) and then figure out what you actually need. Comparing same to your latest tax returns is a reasonable place to start.

And, then, EXERCISE SOME DISCIPLINE!!!

db

danbrown wrote in alt.comp.software.financial.quicken:

I am not advocating a one-size-fits-all approach.

There may be a global list of standardized named categories.

Subsets of this global list may apply to the self-employed.

Others may apply strictly to personal/home finance.

But many transactions come up from TIME TO TIME...they are NOT everyday transactions.

Quicken's Dropdown list for categories does not let you look at all the

40-50 categories that may exist ...they let you look at only a few a time. If a person scrolling the list misses a category that is in fact there, he now makes up a new one whose name only slightly varies from one that he made earlier and forgot that he had made it. Soon he has a mess of categories and now he doesn't know to which transactions he applied those categories...at least that I can see in Q2004.

You're confused here.

I am not telling YOU how to name a category. I don't care HOW you name it: I am just interested in either "Mortgage Interest" or "Mortgage Int." The problem here is when you have TWO CATEGORIES NOW: one named "Mortgage Interest" and another name "Mortgage Int." that means that one day you are categorzing transactions as the 1st, and then the next day you are categorzing under the 2nd category. That's going to be a big headache for you....because when you try to report this, you may only report out the 1st and not even be cognizant of the 2nd, and so you will be missing actual mortgage interest transactions because fo the proliferations of names of categories where there should ONLY be one category name.

By imposing a standard set of category names, with a rigid flexibility in allowing for creating of category names where none truly describe the transaction, you guard against the user-accountant-bookkeeper from making up names where existing categories already apply quite well.

I just opened my Q2004 Deluxe, pressed Ctrl-C, and nothing happened.

Are you trying to suggest it's that simple...as nothing happened...?

My tax returns contain no transaction category information. In fact, I don't use Quicken at all to compute taxes. Perhaps you are confused with another application made by the company.

Look, what's the point of the convenience of software when software does not truly make it more convenient????

Convenient and proper transaction categorization for the purpose of household budgeting, retirmement and investment assessment, and yes, evaluation of taxes, is a fundamental here. If Quicken really doesn't make it easier than someone who is already disinclined to stop using a 3- entry ledger and 10-key calculator, then the software makers are in the wrong business.

I have done application programming and development, so I know what developers of financial application software are capable of.

I am telling any Quicken user that the software should be capable of more.

If the developers don't think that they need to improve upon the product, then perhaps I should be looking for other software where the developers don't take such a narrow view.

As for a disciplined view of accounting: if accountants don't actually use standardized named categories for transactions, I can't imagine the nightmare of auditing that happens without it.

It sounds like you are not really so patient. ;)

First thing I did when I got Q was to delete a lot of their canned categories. Then I added a few that I knew I would need. Looking at prior tax returns (or other financial reporting you have done in the past) is a good start. Then, add categories sparingly, and only after making sure an existing category does not fit the bill.

If, as you seem to say, you now have an overabundance of categories, I think you should print out the category list, and using a pencil, figure out which should be deleted, and which should be merged into a "keeper". Also consider using subcategories. Then, you have the task of recategorizing transactions from categories to be deleted/merged. I don't know if there is an automated way to do this; the few times I needed to recategorize or classify something, I ran a report to list them all, then clicked on each transaction in the report and fixed it - until the list became empty.

Once you do this a few times, you will learn to be more careful in the first place. That is, if you are truly a patient guy.

I don't remember just how different Quicken 2004 was from 2006, but think the basic faciliities are the same. Why don't you run a report like "Income and Expense by Category" under the Reports, Spending option? The report initially will not show subcategories and will show transfers but you can customize all of that. I think by default this report captures every category in which a transaction was entered, and from this you'll see what all of your category choices have been [in whatever time period you use] and can begin consolidating from there. Quicken wont let you delete categories that have transactions against them, so you can either recategorize redundancies one at a time, or do a global recategorize from Tools - Category List (at least in Q2006). But be careful with any global function, of course. Once there are no more transactions against the category, you can delete it (with some exceptions; quicken insists on keeping some hard wired categories, but I can't tell youwhich.)

There is no official list of accounting categories because the items in a "Chart of Accounts", to which the Quicken categories roughly correspond to, varies by business (and I view an *individual's* income and outgo as a form of business). Most higher end accounting software that I've dealt with (from Quickbooks on up to Manufacturing software) has numbered accounts (i.e the number precedes the name) and the number ranges are fixed according to whether the account represents an asset, liability, expense, etc. Those number ranges are relatively standardized, with a few more 0's at the end of some systems. The software will suggest, based on your setup information, which template of numbered accounts to use, but it will still drag in unneeded accounts/categories that need to be deleted for your situation or new ones created. This is usually done in concert with an accountant, before transactions have been entered, altho of course there is room for modification along the rode. It's still much more rigid than Quicken.

You have to keep in mind that Quicken is low priced software and does a lot of things that aren't standard in true accounting to make it easier for the average person to use it. For instance, higher end packages don't let you correct prior period transactions (or at least not the last time I was involved in consulting, which admitedly was sometime ago). So if you do make a categorization mistake, you have to do a journal entry (which doesn't formally exist in Quicken) to rectify the situation. Both your old and new category will be likely be displayed in P & L statements. Accountants want this because it provides an audit trail. Quicken provides no audit trail whatsoever, and allows you to correct any mistake,or alter any transaction any way you choose. That's why accountants don't generally like reports based on it... it's too easily tailored to your purposes. That's good if you're honest and not so good if you're not.

For the money, you can do a great deal with Quicken but don't expect it to match the facilities in high end accounting systems.

Hope this helps, and all you accountants (I only know enough to be dangerous), feel free to correct anything I've erred on.

jo

Hi, Patient Guy.

You really don't need my post. I'm just echoing and confirming what Dan, Gil and Jo have said (and others may add later).

Tailor Quicken to fit YOU!

We can change many parts of Quicken, like how many copies of the Automatic Backup to maintain and whether to let the Enter key move us to the next field. Quicken comes with defaults for these because the program has to have SOMETHING in each of those settings. But we are free to change those defaults to fit our own situation. Probably no two of us have the same settings throughout Quicken - unless we've just accepted all the defaults.

Accounting students spend many hours learning about the accounting equations (assets - liabilities = net worth or capital; income - expenses = net income). Everything from there on is basically refinements of those fundamental relationships. Accounting theory and practice have been developing ever since man learned to write and keep track of his money and other property, especially in his businesses. These business-oriented accounting systems have been adapted - quite imperfectly - to also keep track of personal, non-business transactions and wealth.

Asset, liability and capital accounts are "permanent", because they continue throughout the life of the business. Income and expense records used to be called "nominal accounts" when I studied them a half-century ago (maybe they still are) because they were only temporary storage for the net operating results which would be merged into the net worth account at the end of the year or other accounting period. Quicken calls these "categories", but accountants still call them accounts.

When setting up a new chart of accounts for a new business, the accountant starts with a blank sheet of paper. We can borrow from many sources, trying to find one that comes close to what we need for this new enterprise, but knowing that we almost certainly will need to customize it. We will delete some accounts, create some new ones, and probably change the names of some of the ones we import and keep. We also will leave some gaps in our chart so that we can later add accounts that we didn't anticipate needing. But it's easier to start with that template than to start from scratch. At least SOME of the thinking and organizing have already been done for us.

And that's what Quicken has done. It has suggested some categories based on distilled experience and feedback from thousands (millions?) of users. But they are only suggestions - starting points from which each of us can customize to our heart's content.

No, there is no list of Official Categories to which we must conform. Aren't we glad!?

RC