How to use income categories
![Mike_L](https://us.v-cdn.net/6031128/uploads/defaultavatar/nTYA6S0SVB4GN.jpg)
I am setting up Quicken. I will have 6 accounts - one being an income account. All funds coming in will enter the income account. From there, I will transfer funds to each of the other 5 accounts. Should I have an income category for each of the accounts or just for the income account?
From reading a book, it seems like they were saying just the income account would need an income category and the others would handle the transfers as transfers.
Comments
-
You want to book the income once when you receive it….Transfer allows you to move money from one account to another without double reporting income. The other 5 accounts may still need an income category for interest earned etc. A category once setup can be used in multiple accounts.
0 -
Are you going to be entering all your transactions manually?
If you intend to download transactions, you certainly can't do it with an "income" account.
That would be the only way you could use an "income account" and even then, that would REALLY be going against how Quicken works, and probably cause you all kinds of problems.
Quicken isn't some kind of professional accounting program, it is a personal finance program, and as such as much as possible it reflects the real world. You have Checking, savings, credit card, brokerage, IRA, … accounts, not income/expense accounts. And each transaction gets a category. That category can be income or expense or a transfer.
Signature:
This is my website: http://www.quicknperlwiz.com/1 -
Maybe we should back up for a minute. Quicken should mimick your actual bank accounts. What happens in your real life accounts? Do you get all your income deposited into the same account? Then do you actually transfer it to other accounts like a savings account etc? Categories don't apply to the account. They can be used by all accounts. Income goes to an income category no matter which account it is entered in. Same with expenses. You categorize it to an expense category like Electricity no matter what account you pay it out of.
Do you have credit cards? To properly enter the credit card....
The proper way is to set up a credit card ACCOUNT and enter the charges into it when the purchase is made and assigning it to a category. The transactions need to be entered with the date you charged it, not the date you pay the credit card bill.
Then when you pay the bill you TRANSFER the payment from your checking account to the credit card account. Then when you download the payment from the bank you match it to the one you already entered. Then your credit card account should match what you actually owe at any time.
When you enter the payment in your checking account you put the credit card account name in for the category using square brackets around the name to indicate it is a transfer...like this… [credit card] or newer versions have a Transfer column.
I'm staying on Quicken 2013 Premier for Windows.
0 -
Thanks so much for the replies.
I intend to have one income account. All income will enter there.
Once a month, I will be transferring funds from the income account to each of my distribution accounts. While recording them as transfers will definitely work, I was thinking that counting it as income in each account would be simpler for tracking and budgeting each account. Each account will have its own budget. One account for all house related issues, one account for misc / personal, …. Understand that categories will work across accounts.
Really appreciate your advice
0 -
What is going happen in the real world?
Quicken is setup mainly to mirror the real-world accounts. If you are doing things all manually then you can do what you suggest even if isn't what you are doing in the real-world, but you will be fighting Quicken all the way, and that is going to cause you extra work, and maybe problems.
Quicken isn't an "accounting program" where people are used to having different books for different purposes.
In a way you can think of categories as some of your "books/accounts". If I want to know about all the sources of income, I just select those income categories in a report or view or something.
For instance, here is what it looks like while customizing the categories in a report:
And yes, you are correct categories work across all accounts, that is why they don't have to be in a particular account.
Note that Quicken's account types are like they are in the real-world, Checking, Savings, Credit Card, Brokerage, … It has no concept of an "Income" account, at least not in the non-business editions. In the business edition there are the account types that a small business might use for doing invoicing and accrual account and such.
And on the subject of budgets if you separate your income from your expenses, you can certainly do that, but then you take away Quicken's ability to do the math between the two (or in your case multiple budgets). Quicken's budgets are basically category based.
Much of Quicken is category based.
Signature:
This is my website: http://www.quicknperlwiz.com/0 -
That is kind of where I have been leaning. Just let quicken do what it does and I just need to keep the relationship to transfers and income clear in my mind. After I use it for awhile, I expect it will most likely become crystal clear.
I think I am becoming comfortable isn setting up categories. I would rate myself about 6 0f 10. Confidence will only come from experience.
Thanks for the advice.
Mike
1