Question about split transactions

R.C.
You hit it on the head. Quicken was written as a personal check writer, not a GAAP compliant double-entry business accounting package. Unless you're running a
publicly traded company or have other business requirements, GAAP, depreciation schedules, salvage value, etal. will probably have little meaning for you.
I have an MBA in finance and 12 years in the "Big 8" (am I dating myself RC?) and have seen every chart of accounts scheme imaginable. I personally record sales taxes as a separate category for a couple of reasons.
Years ago they were deductible Schedule A items along with state and personal property taxes. It always reduced the tax bill by a coupleof hundred and I had detailed backup if I was ever audited.
I'm also curious how much I pay all the various government entities for the year. Sales taxes amount to a couple of thousand, on top of all the other taxes I pay the vultures. For some reason though, I never broke out all the taxes on utility bills -- talk about extortion.
Finally, it was easier for me to put taxes in a separate category than to try to apportion and deal with the taxable/non-taxable issues and different tax rates by municipality. Years ago if I made a purchase in one municipality and returned to the same merchant in another, I could be charged/credited at different tax rates. Also Quicken's crappy little calculator didn't help simplify the effort.
Am I GAAP compliant? Who cares? It's money out of pocket and Quicken lets me categorize it and report it any way I see fit. There is no right or wrong answer when it comes to PERSONAL finance.
sb
"R. C. White" wrote:

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Hi, sb.

Yep. I spent only 2 years in the Big 8. Twenty years after my BBA, I enrolled at Cal State College San Bernardino for an MA in Administration with a concentration in Business Administration, not Public Administration. (Don't you love alliteration?) Just about the time I graduated, they changed Cal State College to Cal State University, and they changed my degree to an MBA.
Tax rules change every time Congress meets - and when Treasury adopts new Regulations or the IRS publishes new Rulings, Procedures, etc. - and often when some court somewhere decides that some rule or law has been interpreted wrongly. In the early 1960's, ALL state and local taxes were deductible on Schedule A, and we spent lots of time asking taxpayers about their cigarette taxes, gasoline taxes, auto licenses, etc. Then the rules changed: NO state taxes were deductible - except state income taxes - and then sales taxes. We tried for a while to record and/or reasonably estimate how much sales tax each client had paid; after the IRS published charts, we found that they usually were more generous than our calculations, so we stopped trying to do that for most clients. Remember, this was LONG before Quicken! Not one taxpayer in 100 had records to match what many of us have today. They couldn't even guesstimate how much they had spent for groceries or clothing or utilities or anything else (except their new car), with or without sales tax. So this kind of argument never happened in those days.
The point of that last paragraph: If you plan to keep your personal bookkeeping on the tax basis, you'd better be ready to revise your system often. And don't try to reason it out; just follow the bouncing ball.

AMEN!
RC
--
R. C. White, CPA
San Marcos, TX
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OK - Dad always said "when 2 people tell you you're drunk, go to bed", so I'll agree I was wrong about the undesirability of allocating sales tax expenses to the accounts of the goods being purchased.
I still don't understand why anyone using Quicken would find this useful. If one is going to go to the trouble of finely categorizing their purchases, why not categorize the tax expenses, too? Do they blend their FICA and income tax back into their salary? But I don't need to understand why someone would wish to do so, and needlessly described doing so as "wrong". To the OP: sorry.
TomYoung wrote: > there's actually lots of > situations where you'd capitalize sales taxes.
So, in my truck situation, I'd amortize the sales tax over the life of the truck? I guess I can see that, although I don't like it. The truck loses value over time, for sure, but the one-time expense of the sales tax is incurred all at once and is a function of the purchase action, not the life cycle of the good purchased. Knowing what to capitalize and what to expense was always more art than science if I remember correctly. But one factor was, I thought, whether or not the item/service being acquired had some enduring value. I can re-sell the truck, but I cannot transfer any worth to another person once I've paid the state its sales tax. The "value" of the disbursement instantly dissipates.
> In > California, unprepared food items sold at supermarkets are not taxed > but ready-to-eat hot foods are taxed, as are soft drinks and cat > food. But, for my accounting, it's all "food" and the only way an > automatic allocation of sales tax could work is if I set up two > categories of "food" - maybe "food non-taxed" and "food taxed"
I seem to recall living in jurisdictions where "children's" clothing was untaxed and "adult" clothing was taxed. Silly, and fraud-provoking.
Doug
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OK - Dad always said "when 2 people tell you you're drunk, go to bed", so I'll agree I was wrong about the undesirability of allocating sales tax expenses to the accounts of the goods being purchased.
I still don't understand why anyone using Quicken would find this useful. If one is going to go to the trouble of finely categorizing their purchases, why not categorize the tax expenses, too? Do they blend their FICA and income tax back into their salary? But I don't need to understand why someone would wish to do so, and needlessly described doing so as "wrong". To the OP: sorry.
TomYoung wrote: > there's actually lots of > situations where you'd capitalize sales taxes.
So, in my truck situation, I'd amortize the sales tax over the life of the truck? I guess I can see that, although I don't like it. The truck loses value over time, for sure, but the one-time expense of the sales tax is incurred all at once and is a function of the purchase action, not the life cycle of the good purchased. Knowing what to capitalize and what to expense was always more art than science if I remember correctly. But one factor was, I thought, whether or not the item/service being acquired had some enduring value. I can re-sell the truck, but I cannot transfer any worth to another person once I've paid the state its sales tax. The "value" of the disbursement instantly dissipates.
> In > California, unprepared food items sold at supermarkets are not taxed > but ready-to-eat hot foods are taxed, as are soft drinks and cat > food. But, for my accounting, it's all "food" and the only way an > automatic allocation of sales tax could work is if I set up two > categories of "food" - maybe "food non-taxed" and "food taxed"
I seem to recall living in jurisdictions where "children's" clothing was untaxed and "adult" clothing was taxed. Silly, and fraud-provoking.
Doug
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At one time the IRS, when itemizing deductions, allowed one to deduct EITHER State Income Tax OR State Sales Tax.
If still true that would be one reason to maintain a seperate Sales Tax Category.

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Wait a second guys ! Aren't you all over analyzing the original post? The OP bought a bunch of stuff in two categories (Games and Software), wants to spread the cost of the sales tax across what he bought to find his out of pocket cost for the stuff for his out of pocket expense. I am assuming we're talking about personal expenses, nothing he's reporting as a business expense. THAT'S IT! Nothing more.
If I go into a store and buy something for $5.00 and they charge me 8% sales tax, the cost to me for the item was $5.40. If I buy two different things of varying cost, then the sales tax needs to be distributed across proportionally to allow me to track my true out of pocket costs for the items. I think that's all he cared about! How much did each of the games and software cost him? That's all. Not hard.
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Thanks, Andrew! Right on!!!
I don't know how this ended up as a discussion about capitalizing stuff!!! A $25 game and a $35 program?
Maybe someone doesn't use the split function at all... but if you do extensively, as I do, what I was asking for saves me time. In some cases, I even want to keep record of the price I paid for different items (some of them in the same category) bought at the same time. Which is why "splits" were created! I might have 7 line items in the split window, or more! Actually, Q allows to have tens of lines!! And to add even more!
Well, how do you do it today? Do you multiple every item (let's simplify and assume that everything includes tax in this given receipt) times the sales tax %? If you have 7 line items, how many extra key strokes are we talking about? Let me tell you, the functionality of Money is really simple, and again, Doug, doesn't force you to use it!!! For me, it is much easier to add the price of the items from the receipt (which are pre-tax), and once I've split all the categories, allocate the remaining amount (after checking that all that is left is really the tax amount) proportionally among all the split items. It works great. And I'm sure more people would use this that some features that Q has implemented.
And related to the fact that some expenses are not taxable, I agree. I never used the "F6" key in Money to split my Costco bill into groceries and clothes. I calculated the easier one, applied manually the taxes to it, if applicable, and left the rest for the other category. I can do that in Q the same way as in Money
But please, don't get this into an accounting discussion. It is much simpler. I know that a lot of people adds sales tax to the same category of the item being purchased. If splits are a feature of the program, it just makes sense to give options for users to do things in a simpler way.
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Jose68 wrote:

A long, long time ago, I used to take a gas station receipt that included gas and a car wash, and split it into two pieces: Auto:Fuel and Auto:Maintenece. Now, I have three kids, a house, and too many demands on my time. It goes in as Auto:Fuel.
A similar thing happens when I take a grocery store receipt and enter it as "Groceries." It may include dishwasher detergent, paper towels, tissues and what not, but I ignore that and just budget "Groceries" taking the above into account.
How this is done depends on what I want to learn from my financial records. That's probably different for different people. -- Jim
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Jim, I agree. It all depends on how you want to track your finances.
Now I have another example that's bugging me. I have my TV, phone and internet with AT&T U-verse. The invoice is something like this:
U-verse TV - $79 Broadband - $35 Phone - $25 HD fee - $10 CA local video fees - $7.01 Federal Universal Service fund - $2 Sales Tax - $1.68
It is a pain to manually distribute the CA local video fees, Fed service fund and sales tax among my 3 categories: TV, internet and phone.
How do you guys categorize this in Quicken?
In MS Money, it was "easy". I input the total bill, the first 4 items, and the remaining amount (those $10.69) was magically and proportionately split among those 4 items. Do you all have a category for "Federal Universal Service Fund" or equivalent? Or for State video fees? Or even sales tax?
Thanks!!

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Jose68 wrote:

For my telephone service, I use UTILITIES:TELEPHONE for the entire bill. For the cable people (like your example above), I use UTILITIES:CABLETV and implicit is that taxes and subservices (like internet fees which are part of the 'cabletv') are included. But it depends on what you do with your data. Do you really need to sub-analyze all the little pieces of a bill? Quicken makes it convenient (although in your case it doesn't have the ability to split a difference across categories as we've discussed), but at the end of the game, does one need to be so anal in that? If so, unfortunately, you need to do it manually. (Personally, I would never have a separate category for "Federal Universal Service Fund" or "State video fees". Why would I need to track it at that level? YMMV)
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Jose68 wrote:

I suspect that the "local video fees" should apply only to the cable portion of the bill; and the "Federal Universal Service fund" should apply only to the phone portion of the bill. So I'm not sure spreading either of the two over all other split categories would be correct.
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Hi Jose,
Here is how I do my AT&T Universe Bill. I basically looked at the detail of the bill to determine where the fees and charges below and have this as a memorized transaction. As the bill generally does not change (usually only the fees change) it works well for me.
Cable Memo: Uverse TV U300 $79.00 Cable Memo: Promotional Discount ($10.00) Internet Memo: Yahoo! Broadband Elite $20.00 Job Expenses Tag: Reimbursable Business Exp $20.00 Internet Memo: Bundle Discount ($10.00) Telephone:Residential $30.00 Telephone:Residential Memo: Promotional Discount ($5.00) Cable Memo: HD Technology Fee $10.00 Cable Tag: CA Local Video Service Fee $4.19 Cable Tag: CA Local Video Facilities Fee $0.50 Telephone Tag: Federal Universal Services Fee $2.00 Telephone Tag: 911 Emergency System $0.09 Cable Tag: CA Sales Tax $0.84
I do a similar breakdown of other bills (cell, electric, garbage, etc.). I used to enter tags on purchases, but found I never had enough to deduct so for the most part I have stopped tagging those transactions. The bundle discount probably could have been split between the Cable, Internet and Phone, I just lumped it under Internet as my choice.
-----Original Message----- From: Jose68 [mailto: snipped-for-privacy@gmail.com] Posted At: Tuesday, December 22, 2009 7:36 PM Posted To: alt.comp.software.financial.quicken Conversation: Question about split transactions Subject: Re: Question about split transactions
Jim, I agree. It all depends on how you want to track your finances.
Now I have another example that's bugging me. I have my TV, phone and internet with AT&T U-verse. The invoice is something like this:
U-verse TV - $79 Broadband - $35 Phone - $25 HD fee - $10 CA local video fees - $7.01 Federal Universal Service fund - $2 Sales Tax - $1.68
It is a pain to manually distribute the CA local video fees, Fed service fund and sales tax among my 3 categories: TV, internet and phone.
How do you guys categorize this in Quicken?
In MS Money, it was "easy". I input the total bill, the first 4 items, and the remaining amount (those $10.69) was magically and proportionately split among those 4 items. Do you all have a category for "Federal Universal Service Fund" or equivalent? Or for State video fees? Or even sales tax?
Thanks!!

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Sounds reasonable. And I guess that, since sales tax is not much, it's ok to just add it to the cable category. But I assume it should apply to phone and internet too, right?
I agree with John that spreading fees over all categories as I was doing was not the best way to handle it.
Thanks! I'll simplify it, and I'll follow your advise.
And I guess I'll do the same thing for G&E. I get a charge from "City of San Diego Franchise Fee Differential 1.03% Gas 5.78% Electric", which last month was $5.00, and I guess I'll need to split that between G and E. There are other charges that I was also spreading over both, but they can be identified as gas or electric easily.
I guess the "proportionately allocate difference" feature from Money was making me have some bad habits :) Although I also like that for sales tax allocation! ;)

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Actually on my bill the CA Sales tax does only apply to the Cable portion - according to the second of the bill that provides the line of line itemization of the charges. So in my case, I would not split it out. I believe the tax is on the HD Tech Fee (although I think it is off a penny due to rounding).
-----Original Message----- From: Jose68 [mailto: snipped-for-privacy@gmail.com] Posted At: Wednesday, December 23, 2009 1:32 PM Posted To: alt.comp.software.financial.quicken Conversation: Question about split transactions Subject: Re: Question about split transactions
Sounds reasonable. And I guess that, since sales tax is not much, it's ok to just add it to the cable category. But I assume it should apply to phone and internet too, right?
I agree with John that spreading fees over all categories as I was doing was not the best way to handle it.
Thanks! I'll simplify it, and I'll follow your advise.
And I guess I'll do the same thing for G&E. I get a charge from "City of San Diego Franchise Fee Differential 1.03% Gas 5.78% Electric", which last month was $5.00, and I guess I'll need to split that between G and E. There are other charges that I was also spreading over both, but they can be identified as gas or electric easily.
I guess the "proportionately allocate difference" feature from Money was making me have some bad habits :) Although I also like that for sales tax allocation! ;)

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Doug wrote:

Because your financial recordkeeping system should tell you what you need to know. When I used to deduct state sales tax on my federal return, I had a separate category for it, and, in this example would have just entered all the numbers from the receipt.
Now, I no longer track sales tax separately, and it's more useful to know what I paid for something, including the sales tax. So I also do the price*(1+ t) method. -- Jim
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What I have done in a few cases is use the calculator when entering amounts in a split window. I would multiply each part that is taxable (for instance) with 1.07, since Jersey now has a 7% salestax.
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There is a SPLIT command when you click on the assignment field. The $67 shows up on the top line. If you assign the first line to GAMES and $25, quicken puts the remaining $42 as unassigned. Then, you do software and finall the SALES TAX for $7 which is the remainder. Then you memorize the transaction w control M and it will save the amounts or as a percentage.
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