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Need to categorize transfers that are an asset. Account is receiving money.

lworks86

I manage three checking accounts. One for John, Chris and Mary. Mary pays $99 for a cell phone bill for all three. Mary has an entry for "Phone company" as payee and category "cell phone" with $99 as payment. John and Chris each need to pay $33. John transfers 33 to Mary and so does Chris. The transfer shows the Payee as Mary and the category is the linked account as Chris checking. How does Mary categorize the payments/transfers from Chris and John? Quicken help says "When you transfer money from one account to another, you're not spending or receiving money—you're simply moving it" In this case that statement is not true. John and Chris are spending money and Mary is receiving money. What is the best way to handle these transactions?

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volvogirl

Do you have all 3 checking accounts in the same data file? Each person's accounts should be in a separate data file. Mary should have an Accounts Receivable asset account. When she pays the bill it should be a split transaction. Her $33 goes to cell phone and $66 goes to the A/R account.

Then when she gets the payments from the other 2 the checking deposit goes to the A/R account to clear it. But this won't work right if you have all 3 checking accounts in the same data file. John and Chris need to have an Accounts Payable account set up for their payments and not as a transfer to Mary's checking. Mary will need to make a new transaction for the payments when she gets them. Not as a transfer.

When Mary pays the whole bill then Chris and John need to enter their part into their Accounts Payable with a category of Cell Phone (their own cell phone categories, not hers).

Hope you can follow that and it makes sense.

Tom Young

You have to understand that a Quicken file tracks the financial transactions of some "entity."

The entity might be a single person where all transactions within the file pertain to and affect that individual, or a married couple where, even though there's two people involved, implicitly the approach is "what's mine in yours and what's yours is mine, because we're in this together."

I don't know if there's an "entity" of John, Chris and Mary, like maybe a partnership of some sort, but Quicken simply can't handle that situation, at least not at all reasonably. A partnership requires separate capital accounts, usually "capital accounts" and a "current accounts." Quicken just isn't set up to do that.

lworks86

Volvogirl and Tom Young

All three accounts are in the same data file. All three have savings and checking accounts at the same bank. Mary (the guardian) is on all three accounts. Each account has its own income and expenses. Some categories like cell phone and internet are shared but have one bill, paid by Mary. If these were businesses, then I would agree that each should have their own data file. It isn’t practical to have 3 data files, yet John and Chris need to show that they paid $33 for the cell phone bill and Mary needs to show that she received them and that it was for the cell phone bill.

For arguments sake, say there are three data files. Chris transfers $33 from his checking account to Mary’s checking account at the bank. Quicken then downloads the transactions from Chris’s checking account. Quicken will show the withdrawal but won’t have a category since there is no link to Mary’s account. Mary’s account will show a deposit again with no category. So I would need to set up categories in Chris and Bill accounts like, Cell-phone-payment-Marry. In Mary’s account set up Cell-phone-payment-Chris and cell-phone-payment-Bill under Cellphone. Then change the downloaded transactions accordingly. For that matter, why can’t I do that while keeping all the accounts in one data file?

Tom Young

"For arguments sake, say there are three data files. Chris transfers $33 from his checking account to Mary’s checking account at the bank. Quicken then downloads the transactions from Chris’s checking account. Quicken will show the withdrawal but won’t have a category since there is no link to Mary’s account."

You cannot simply rely on "downloads" into Quicken to "do your accounting for you" in any situation. You are the chief accounting officer of any file that you control, so you need to understand what's going on and make appropriate manual entries. Sorry, that's just the way it is if you want accuracy.

So Mary pays the cell phone bill. In her file that transaction would be entered as a split transaction:

Debit (increase) Mary's Cell Phone Expenses $33 (This is a Category)
Debit (increase) Due From Chris $33 (This is an Account)
Debit (increase) Due from John $33 (This is an Account)
Credit (decrease) Mary's Checking $99 (This is an Account)

(As a practical matter if the volume of transactions is low the "Due From" Account could be compressed to one "Due From Chris/John" Account.

In Chris' file the payment accounting entry would be:
Debit (increase) Chris' Cell Phone Expenses $33 (This is a Category)
Credit (decrease) Chris' Checking $33 (This is an Account)

You'll notice that the debits equal credits in both files, the "double entry" aspect of accounting. And then when Mary receives the cash the entry in her file would be:

Debit (increase) Mary's Checking $33
Credit (decrease) Due From Chris $33

You could mimic this in one file of course but it could get confusing real fast if there's lots of Categories and lots of transactions and especially if there's more than one person paying for "all of us."

One trick you might be able to use is to use the Quicken "feature" of "self referential" transactions where an entry in an Account affects no other Account (that you can see) or Category in the file. One approach here would be along the lines of:

Debit (increase) Mary's Cell Phone Expenses $33 (This is a Category)
Debit (increase) Chris's Cell Phone Expenses $33 (This is a Category)
Debit (increase) John's Cell Phone Expenses $33 (This is a Category)
Credit (decrease) Mary's Checking $99 (This is an Account)

Then in Chris's checking Account when he paid Mary the entry would be to reduce checking by $33 and the "Category" used also would be Chris's Checking, surrounded by square brackets [Chris' Checking]. That "magically" reduces Chris' checking Account, while his expense has already been captured in Mary's payment. Then when the $33 shows up in Mary's Account she uses the same trick to "magically" increase the Account's balance without affecting any other Account (you can see) or Category.

volvogirl

Do they all file separate tax returns? Like a Special Needs Trust returns? Quicken should follow tax returns. You aren't filing them on Mary's tax return. That's why you should use separate data files. They are separate entities for taxes.