[GNC] accrual of property tax payments

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[GNC] accrual of property tax payments

Keith Bellairs
My property tax is payable in 4 installments -- August, November, February,
and May. I have tried to set this up with my town as the vendor and 4
payments.

When I ran my income statement for last year, I see that the future
liabilities have been posted with the date that the bill was posted, not
the date that the bill is due. So all of my 2019 payments show as tax
expense in 2018.

Is there a way to have the vendor bills show up dated with the due date
instead of the date posted?

Keith
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Re: [GNC] accrual of property tax payments

Stephen M. Butler
On 2/10/19 9:49 AM, Keith Bellairs wrote:

> My property tax is payable in 4 installments -- August, November, February,
> and May. I have tried to set this up with my town as the vendor and 4
> payments.
>
> When I ran my income statement for last year, I see that the future
> liabilities have been posted with the date that the bill was posted, not
> the date that the bill is due. So all of my 2019 payments show as tax
> expense in 2018.
>
> Is there a way to have the vendor bills show up dated with the due date
> instead of the date posted?
>
> Keith

Keith,

When you enter the transactions, what date are you using?  That would be
the first column on the General Ledger entry window?  Whatever you put
there will be the date attached to that transaction for all of the reports.

--
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Liz
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Re: [GNC] accrual of property tax payments

Liz
On Sun, 10 Feb 2019 10:10:52 -0800
"Stephen M. Butler" <[hidden email]> wrote:

> On 2/10/19 9:49 AM, Keith Bellairs wrote:
> > My property tax is payable in 4 installments -- August, November,
> > February, and May. I have tried to set this up with my town as the
> > vendor and 4 payments.
> >
> > When I ran my income statement for last year, I see that the future
> > liabilities have been posted with the date that the bill was
> > posted, not the date that the bill is due. So all of my 2019
> > payments show as tax expense in 2018.
> >
> > Is there a way to have the vendor bills show up dated with the due
> > date instead of the date posted?
> >
> > Keith  
>
> Keith,
>
> When you enter the transactions, what date are you using?  That would
> be the first column on the General Ledger entry window?  Whatever you
> put there will be the date attached to that transaction for all of
> the reports.

If you want to see it as four instalments you would need to enter the
bill as four different bills, each with a separate date.

Liz
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Re: [GNC] accrual of property tax payments

Adrien Monteleone-2
In reply to this post by Keith Bellairs
You should speak with a local CPA, but I’d posit that if you receive a bill for the full amount, then the taxes are all for one year and belong in that year. You are simply being allowed to pay the bill in installments but it is otherwise fully owed.

There might be a hitch if the bill received in 2018 was for 2019 and you were pre-paying half of it. But that is just a posting date adjustment. (which might necessitate the use of a 'pre-paid expenses' asset account as a temporary intermediary)

But if your CPA says you need to recognize only the quarterly payments as expenses when they were actually paid then:


Method 1:
=========

Creating 4 separate bills with their own future posting dates as Liz suggested.


Method 2:
=========

Continue as you are now, but create an adjusting transaction at the end of the year(or even right away) reversing the second half of the expense to an “Accrued Expenses” account. (sits under Liabilities) When you make your future February and May payments, re-expense those amounts.



There might be some 3rd method using an intermediate account, but I can’t seem to figure out where it would go in the tree.

It isn’t a pre-paid expense, so Assets is out.
It isn’t a contra-expense because that would cancel itself out.
It isn’t a liability because that would also cancel itself out.
It isn’t revenue, so Income is out.
It doesn’t belong in Equity, though I suppose you could use that and understand it is a ‘virtual account’.

Really, if you need to recognize this on a cash basis, you shouldn’t be using the Business Features for this. Instead use manual transactions or scheduled transactions on the dates you make the payments. The Business Features are for accounting on an accrual basis.

Regards,
Adrien


> On Feb 10, 2019, at 11:49 AM, Keith Bellairs <[hidden email]> wrote:
>
> My property tax is payable in 4 installments -- August, November, February,
> and May. I have tried to set this up with my town as the vendor and 4
> payments.
>
> When I ran my income statement for last year, I see that the future
> liabilities have been posted with the date that the bill was posted, not
> the date that the bill is due. So all of my 2019 payments show as tax
> expense in 2018.
>
> Is there a way to have the vendor bills show up dated with the due date
> instead of the date posted?
>
> Keith


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Re: [GNC] accrual of property tax payments

Derek Atkins-3
In reply to this post by Keith Bellairs
Keith Bellairs <[hidden email]> writes:

> My property tax is payable in 4 installments -- August, November, February,
> and May. I have tried to set this up with my town as the vendor and 4
> payments.
>
> When I ran my income statement for last year, I see that the future
> liabilities have been posted with the date that the bill was posted, not
> the date that the bill is due. So all of my 2019 payments show as tax
> expense in 2018.
>
> Is there a way to have the vendor bills show up dated with the due date
> instead of the date posted?

See:  https://bugs.gnucash.org/show_bug.cgi?id=95700

This is talking about customer invoices, but vendor bills use the same
logic.  Note the date of the bug report.

> Please remember to CC this list on all your replies.
> You can do this by using Reply-To-List or Reply-All.

-derek

--
       Derek Atkins                 617-623-3745
       [hidden email]             www.ihtfp.com
       Computer and Internet Security Consultant
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Re: [GNC] accrual of property tax payments

Keith Bellairs
Thanks, Derek. The issue has been around for years, I guess.

Looking at invoices, for a cash basis user the invoice should get posted to
payables when received and the payable is reversed to expense on the date
the payment is actually made.

For an accrual basis user the expense could be posted immediately to the
(past, present, or future) "due date". If it's in the future it won't show
up in current P&L, which is correct. I found that I could not edit the
dates on the expense transactions that were created by the business logic,
so all 4 quarters show up as expenses on the day I posted the invoice. That
doesn't seem right in anyone's world.

But the invoice logic is overkill for me. I'll go back to scheduled
transactions. For my purposes scheduling 4 transactions is fine.

Keith



On Mon, Feb 11, 2019 at 5:23 PM Derek Atkins <[hidden email]> wrote:

> Keith Bellairs <[hidden email]> writes:
>
> > My property tax is payable in 4 installments -- August, November,
> February,
> > and May. I have tried to set this up with my town as the vendor and 4
> > payments.
> >
> > When I ran my income statement for last year, I see that the future
> > liabilities have been posted with the date that the bill was posted, not
> > the date that the bill is due. So all of my 2019 payments show as tax
> > expense in 2018.
> >
> > Is there a way to have the vendor bills show up dated with the due date
> > instead of the date posted?
>
> See:  https://bugs.gnucash.org/show_bug.cgi?id=95700
>
> This is talking about customer invoices, but vendor bills use the same
> logic.  Note the date of the bug report.
>
> > Please remember to CC this list on all your replies.
> > You can do this by using Reply-To-List or Reply-All.
>
> -derek
>
> --
>        Derek Atkins                 617-623-3745
>        [hidden email]             www.ihtfp.com
>        Computer and Internet Security Consultant
>
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Re: [GNC] accrual of property tax payments

Adrien Monteleone-2

> On Feb 12, 2019, at 11:47 AM, Keith Bellairs <[hidden email]> wrote:
>
> Thanks, Derek. The issue has been around for years, I guess.
>
> Looking at invoices, for a cash basis user the invoice should get posted to
> payables when received and the payable is reversed to expense on the date
> the payment is actually made.

The question here is posted to ‘payables’ and ‘what else?’

Every transaction must have (at least) two splits.

In the paper world, a cash-basis entity would not even enter any transaction for a received bill until it is paid.(their ‘payables’ would be kept separate from the actual books)

What would need to happen in GnuCash is the option to mark a bill as ‘cash basis’ when entering it. This would set the posting date as the date it is paid, but still allow the ‘due reminder’ to fire, and GC would have to maintain a separate list of ‘due bills’ from A/P since it technically can’t be entered there. (unless some one finagles some sort of virtual account for the purpose)
>
> For an accrual basis user the expense could be posted immediately to the
> (past, present, or future) "due date". If it's in the future it won't show
> up in current P&L, which is correct.


Accrued means it is already incurred, so it wouldn’t necessarily (if ever) be posted to the due date. It should be posted likely on receipt or an even earlier date if applicable, that is, in the period the expense was incurred.


> I found that I could not edit the
> dates on the expense transactions that were created by the business logic,
> so all 4 quarters show up as expenses on the day I posted the invoice. That
> doesn't seem right in anyone's world.
>

You can’t edit the expense transactions if you posted the bill to expense in the line items. They are part of the bill and that is the only place you can edit it. This is for safety. You could make a mess if you were able to edit portions of a bill, outside of the bill itself.

If you really need to edit a bill that is posted, you have to first un-post it. But beware that even though you can put dates on line items, those do not affect posting or transaction dates. The entire bill gets a single posting date of your choosing. Those line item dates are merely reference for you or your customer. (if speaking of invoices)

Again, having all four quarters show up in one year being ‘right’ depends on your situation. If this is merely a ‘payment plan’ then it is correct. The entire bill is owed now, and thus is an expense in its entirety, now, but they allow you to pay it over 4 quarters. If you were to sell the property mid-way, who does the town legally think owes the taxes? But by all means, speak to a local CPA to get a definitive answer on how to book this.
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