Categorizing Individual Reimbursements to Joint Account

Adam Q

My wife and I track our joint expenses in quicken. Both of us take an allowance from each paycheck for individual discretionary items, to spend as we wish. This takes the form of a regularly scheduled transfer of funds from our joint account, to our individual accounts, and Allowance is a joint expense category in Quicken.

This year, we both had to individually reimburse the joint account for ... 1) Taxes incurred on our joint return and paid for by joint funds, for capital gains we each made on individual (non-joint, non-shared) investments. 2) Travel expenses paid from joint funds, but that we agreed to partially reimburse the joint account for (from individual funds) since we went over our agreed to travel budget. We split the overage.

The way the funds flowed were that we took our normal allowance amounts, and transferred the reimbursement amounts from our respective individual accounts, to our joint account (rather than deducting the reimbursements from our allowance transfers). There are therefore two credit transfers for the tax reimbursements, and two credit transactions for the travel overage reimbursements (one from each of us).

Question is whether to consider the credit transfers to our joint account, as:

1) Credits toward the expenses categories (tax and travel) related to the reimbursements. By doing this, we leave the allowance expenses untouched, but distort the tax and travel expenses (they look lower than they actually were on reports etc..).

2) Debits against the allowance category. This keeps the tax and travel expenses accurate, but distorts the allowance numbers on reports.

3) Misc Income. This leaves all the expense categories untouched, but I'm not sure a transfer from individual to joint accounts is considered income?

4) Other ideas?

Thank you in advance!


Thank you in advance for your advice.

Tom Young

Question is whether to consider the credit transfers to our joint account, as:

1) Credits toward the expenses categories (tax and travel) related to the reimbursements. By doing this, we leave the allowance expenses untouched, but distort the tax and travel expenses (they look lower than they actually were on reports etc..).

Well, first of all, you're accounting for your "family unit" (you and your wife) and the fact of the matter is that the tax and travel expenses were incurred by the family unit.  They are what they are and I see no reason in the world that you'd want these expenses misstated.  So the answer to 1) is "No."

Secondly, transferring money from one bank account to another bank account - or two bank accounts - is not an expense, it's simply a transfer of money within the family unit.  (I assume the two accounts are included in your joint Net Worth reports.)  Just like moving money from a checking account to a savings account, or vise versa, is not an expense or an income, the fact that you routinely move some money from the joint account to two "spouse discretionary"accounts, or had to move money from the two discretionary accounts back to the joint account, doesn't create any expense or income. 

I know you can make a transfer look like an "expense", showing up in an Income and Expense report down in the Expenses area as "To Discretionary Account 1" and "To Discretionary Account 2", and maybe that's what you're doing, but the fact of the matter some money flowed out of those accounts and back to the joint account, and the NET of the two contrary flows is proper presentation.

"2) Debits against the allowance category. This keeps the tax and travel expenses accurate, but distorts the allowance numbers on reports." 

That's the more correct presentation.  Have you ever made a purchase with a credit card, expenced that purchase using some Category, but eventually returned that item for a refund?  The proper accounting in this case is to reduce  the amount owed in the credit card account and to reduce the expense Category you previously used when you made the purchase.  Your situation is analogous to that.  You "expenced" a lot of money moved to the discretionary accounts, but eventually had to return some of that money, increase the balance in the joint account and reducing the "expense."

"3) Misc Income. This leaves all the expense categories untouched, but I'm not sure a transfer from individual to joint accounts is considered income?"

It's not income, just like the transfers to the individual accounts isn't really expense, even though you may be calling those transfers "expenses" in your statements.  The money coming back to the joint account reduces those expenses.

Adam Q

Thank you for the thoughtful response @ Tom. Since my wife and I do not consider our individual accounts or investments in our net worth, or as part our financial picture whatsoever, would that change your answer? We treat our individual finances with a sort of "What happens in vegas stays in vegas..." mindset. Those funds are not considered in our financial plan either.

Tom Young

That would not change my recommendation. 
Under that arraingment the money spent out of the "family unit" data file is considered a true expence.  That is, the money spent doesn't reduce a liability Account in the file and doesn't increase or create an asset in that file, it's a pure period expence when disbursed.

So, some of the money spent on that particular expense was refunded to the family unit "entity.". The most logical way to account for the refund is as a reduction of that expense.