Booking a refund for last year's expense.

bickp

Last year I entered a transaction to pay for a month long camp site for this year. I used the 'camp ground' expense category and want to account for it in the year I spend the money, not the year that I camp. I just got the refund and will deposit on Tuesday. But I don't want that refund to apply against the category this year. That would understate expenses for this year when I do my forward budgeting for next year and beyond.
After making the deposit and reconciling it after downloading the bank transaction, I was considering changing the date, backdating it to 12/31/19.
Is there a better way to manage that? I don't want to create another category for camp site refunds.
Thanks for your consideration.

GeoffG

Unless you are a registered corporation, you are not required to accrue an expense. This is personal financial software and it does not need to be overly complicated. If you purchase an item in month one and then return four months later, there is no reason to back date it. Yes there is a charge one month and a credit months (or year) later that is not offset, but you know why. You don't need to explain it to creditors.

You can create a contra account to process, but it does seem overly complicated. IMHO

bmciance

I agree with GeoffG.  One thing you could do if you want is to create a 'camp ground refund' category (or even sub category) so that the expense and refund are together but show as separate lines.  Whatever you do, I would NOT backdate the entry.

Frankx

Hi @bickp,

I would not suggest that you backdate the deposit that you just made, since it actually belongs in this year's banking activity and could cause problems with the reconciliation.  I think the easiest thing would be to "recatagorize" the payment made last year to an "asset" or "liability" type account and to similarly record the refund against that same account.  Some folks will use a "petty cash" or "exchange" type account for this purpose.  It keeps the bank and credit card accounts in order when these types of timing issues popup.  And it won't affect your budgeting.

Let me know if you have any follow-up questions.

Frankx

bickp

Agree with GeoffG that there is no requirement for reporting and with bmciance that backdating is not a good idea. Hence my question.

First, I'll be quick to acknowledge that I can over complicate things from time to time. And I've not done GAAP type accounting since study days which are pre 1975 graduation.

But now at 67, I am recognizing that memory is not perfect and not getting better and I've got tons of expense categories, some would say too many.

So my question is borne about not understating my 2020 expense category called:

Recreation: Airstream: Overnight Fees.

That is the account I assigned the $550 payment to last April, when paid. And that is the account I hesitate to assign the refund to.

Why? In December, and in subsequent Decembers as long as I'm able, I will look back at the prior year expenses, as I plan the coming year. I worry that I might not explode the category and therefore miss the big refund. If I am that careless, I could understate the category in my planning.

Intrigued by the 'Asset / Liability' account concept, or other ideas. Does that mean that when I spent the money (April 2019) it was an expense that created an Asset(one month of camping at that location)? And now that I have a refund would applied (transfer in Quicken terms) against the asset, bringing the asset back to zero balance, and the checking balance up?

Again, don't worry about critiquing this unfavorably. This is just my personal planning so legalities are not an issue. Just looking for simple way for stupid to handle. And curious if I am understanding the asset/liability methodology.

Frankx

@bickp,

You asked:
Does that mean that when I spent the money (April 2019) it was an expense that created an Asset(one month of camping at that location)? And now that I have a refund would applied (transfer in Quicken terms) against the asset, bringing the asset back to zero balance, and the checking balance up?

Yes, sort of.  Think of it as a "deposit" or "prepayment" made in advance of actually "using the property". You record the original payment not as an expense but as an asset and when you get the refund you post it to that same asset account.

GeoffG

"So my question is borne about not understating my 2020 expense category called:
Recreation: Airstream: Overnight Fees.

That is the account I assigned the $550 payment to last April, when paid. And that is the account I hesitate to assign the refund to. "

Great and valid points. If it were me, I would post the refund where it came from. You seem to infer that you will always budget this amount into the foreseeable future. Maybe, maybe not. We all see what can happen with future plans.

If you are sure about not posting to Overnight Fees, you can just as easily put it to Miscellaneous income since it was an unplanned fee return.

bickp

Thanks to all. Late eastern time and now I've got some options to contemplate. Really impressed at the responsiveness of this group. Thank you.

NotACPA

This is, really, a quite simple issue.

Quicken is a "cash basis" financial system.  You should record expenses when paid and income (negative expense, in this case) when received.

Backdating the income will throw off ALL of your records in that account from the date of initial expense until the refund is received.

Frankx

It is not true that "Quicken is a "cash basis" financial system".  Quicken can be used as either a "cash basis", "accrual",or  "hybrid" (such as "modified cash") financial system - that is up to the user.

Frankx

NotACPA

What Q calls "accrual" isn't really ...  in that it doesn't take into account the recognition of income when the work is done NOR the recognition of expense when that work is performed.

In both cases the user needs to manually input the info (i.e., back date the transaction) ...  which returns it to a cash system.

"Hybrid" involves backdating also.