Showing the "Opening Balance" in a Budget

Perihelion

I'm the reluctant treasurer for a small condo. I believe I can understand how to create the annual budget, EXCEPT that I have to begin with the "opening balance" currently in the bank account, and, browsing tutorials, I don't see how to do that????? Any help greatly appreciated!

Chris_QPW

Budgets don't have an opening balance, they are category based, not account based.

A budget is stating that you will spend x amount money in y number of categories, and when totaled up will be Z amount.

Also, Quicken's budget doesn't support moving "extra cash" between categories.

To me "opening balance" sounds like someone saying "You have $100,000 for the year, and you will spend from that and when it gets to zero you are out of luck."

In that case you would setup an account where all your spending is going to be recorded, with that opening balance (say a checking account), and a budget trying to guess at what those future transactions are going to be (hopefully totaling less than what you are authorized to spend for the year).

The "connection" between the two is that the budget will gets isn't "actuals" from the spending in that account, and if everything goes right you won't spend that account to zero.

Chris_QPW

Stated a different way.  A budget is a prediction on what you are going to spend on certain categories, and a way to track how far off you are as you do the actual spending.

The account(s) are where you record the actual spending/transactions.

Perihelion

Perhaps it’s not a “budget”, but we have “X” amount of money in the bank today. Condo fees paid monthly will add to that balance, and operating expenses will deduct from it, leaving, I hope, a positive amount of money in the account at the end of 2022. I need to predict all of this in advance, hence my use of “budget”…..

Chris_QPW

Perihelion said:

Perhaps it’s not a “budget”, but we have “X” amount of money in the bank today. Condo fees paid monthly will add to that balance, and operating expenses will deduct from it, leaving, I hope, a positive amount of money in the account at the end of 2022. I need to predict all of this in advance, hence my use of “budget”…..

Note I'm a Quicken Windows user and I'm not sure about if Quicken Mac's budget system has rollover features and using reminders as future "actuals" so I'm going to try to set this up where they don't exist.
Also, I take it that this is in fact an annual budget that is broken out by month.  If it is an annual budget that just has one yearly value per category, then it is much simpler.

Create a category "Opening Balance" (or whatever you would like to call it) and create a dummy account.  Make that account separate from the net worth totals.  You can now select this in the budget as one of the income categories.  What you put into this budget category is enough each month to cover any shortfall for the month from rest of the budget for that month.  What you are looking for is that the shortfall for the year doesn't exceed the opening balance (or whatever amount of it that you are supposed to have left at the end of the year.)  So, you will need to record that opening balance somewhere in a note or something.

Now for the actual use of the budget over the year.  You will be recording the expenses in the real checking account.  You will be recording the "shortfalls" in the dummy account.

Chris_QPW

I realize I didn't say what to do with a surplus in any given month.  You are going to need two more categories, Surplus (income category), SurplusBalancing (expense category).

Use the SurplusBalancing category to zero out the surplus for that month, and then use Surplus to add it into the next month.

jacobs

Financial statements for an organization typically consist of (at least) two documents:

1. an income statement (also called a profit & loss statement) which shows revenues and expenses totaling to net income -- your bottom line for the year; and
2. a balance sheet, which shows your assets and liabilities. Your opening balance in your checking and/or savings account(s) is an asset. Any money owed to the association (receivables) would also be an asset, while any money the association owes (payables) would be a liability. 

In Quicken, a Category Summary report is your income statement. And a Net Worth report is your balance sheet. The budget is a mirror of your income statement, projecting your anticipated revenues and expenses; it does not include an opening balance.

You could create a projected year-end balance sheet if you wish — but not easily in Quicken. When I was treasurer of a small non-profit association, I created a simple projected balance sheet in a spreadsheet to accompany the projected income & expense budget. If you want, you could create a net asset statement in a spreadsheet, starting with your opening balance, then listing your projected revenues and expenses for the year, and ending with the projected ending balance.