Question about split transactions
in [Quicken]
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From: R. C. White on 19 Nov 2009 13:23 Hi, Tom. "TomYoung" <sombodee(a)gmail.com> wrote in message news:b368275e-7201-4378-865a-906ae853b15a(a)f1g2000prf.googlegroups.com... > On Nov 18, 12:20 pm, Doug <Doug_Ell...(a)yho.com> wrote: >> I'm actually having a hard time thinking of a situation in which one >> would capitalize a point-of-sale Sales Tax payment. Maybe there is one. > > Well, from a strict theory standpoint, R.C. White expressed the > accounting convention correctly, so there's actually lots of > situations where you'd capitalize sales taxes. Quicken gives you the > flexibility to be conventional or unconventional in your > accounting. :-) I agree. Sometimes it's hard to recall that Quicken was designed as a checkbook program. It took a very pragmatic approach, ignoring accounting theory in many ways. >> Many of my purchases involve a mix of taxable and non-taxable items. So >> when for example I'm splitting a Costco bill, I might have some portion >> categorized as groceries, some as clothing, and some as medicine. In my >> state, groceries aren't subject to sales tax, so if Quicken apportioned >> the sales taxes to all the split categories, that would be incorrect >> also. > You've expressed the most significant problem to the "really easy to > implement" process of automatic allocation of sales tax. In > California, unprepared food items sold at supermarkets are not taxed > but ready-to-eat hot foods are taxed, as are soft drinks and cat > food. But, for my accounting, it's all "food" and the only way an > automatic allocation of sales tax could work is if I set up two > categories of "food" - maybe "food non-taxed" and "food taxed" and > then Quicken supplied a check box in the category setup that > identified each category as to sales tax eligibility. Depending on > how you categorize purchases, where you shop, and your local sales tax > structure you could end up with dozens of categories you'd have to > identify this way. I practiced public accounting in California for 18 years (1962-1980) and had plenty of experience with the sales tax, both professionally and personally. Then I lived and practiced in Oklahoma for 10 years; the sales tax rules were mostly the same. Now I've been in Texas for nearly 20 years, but retired, so my experience here is only personal, not professional - but the general sales tax rules are still similar. "Groceries" are not taxable, but meals and some prepared foods are. As you said, a Quicken programmer would have to deal with "dozens of categories" in trying to program automatic allocation of sales taxes - and then we users would have to classify each multi-item purchase receipt to match those! Can you imagine how much WE would gripe about that inconvenience? >> But I still come back to the notion that Quicken can't be expected to >> read my mind. It has to be programmed with some conventions in mind, >> and the conventions Intuit used are vaguely based upon bookkeeping >> principles. My recollection is that this thread began with a new >> Quicken user asking why Q didn't let him do something that Microsoft >> Money did let him do. The only reasonable answer is that Intuit didn't >> write the software that way because they didn't think anyone >> would/should want to falsely categorize an expense. > > Nah, that's not the case. Accounting conventions are certainly *not* > what drives the programming at Quicken; it's much more the "black > letter" government rules and and regulations, e.g., capitalizing the > "expense" of broker's fees in your stock basis. I've complained here > before, many times, that Quicken should have a lot more accountants > working on the product to catch improper accounting that's "built in" > by the programmers. Tax laws are written by legislators - and very few of those are accountants. That's why so many corporations have to keep more than one set of books. One set is kept according to accounting principles developed over centuries by accountants who were trying to report accurately the results of business activities. The other set is kept according to laws, which are concerned with producing tax revenues and - more and more in recent decades - with motivating taxpayers to act in certain ways that lawmakers want us to behave. These tax provisions very often do not conform with accounting principles! They don't have to make sense; they are the LAW! :^{ Even if tax laws allow you to deduct the sales tax you pay on your new car or computer or shirt or candy bar, the tax on that transaction is still a part of the cost - to you - of buying that property. Accounting theory has evolved over the centuries, but I suspect that, even at the "University of Connecticut, many years ago", that is what was being taught in accounting theory classes. That's what I was taught at the University of Oklahoma in the 1950's (BBA in Accounting, 1956). And I'm pretty sure that is what today's students are learning. > Tom Young RC -- R. C. White, CPA San Marcos, TX (Retired. No longer licensed to practice public accounting.) rc(a)grandecom.net Microsoft Windows MVP (Using Quicken Deluxe 2010 and Windows Live Mail in Win7 x64)
From: Doug on 19 Nov 2009 13:32 OK - Dad always said "when 2 people tell you you're drunk, go to bed", so I'll agree I was wrong about the undesirability of allocating sales tax expenses to the accounts of the goods being purchased. I still don't understand why anyone using Quicken would find this useful. If one is going to go to the trouble of finely categorizing their purchases, why not categorize the tax expenses, too? Do they blend their FICA and income tax back into their salary? But I don't need to understand why someone would wish to do so, and needlessly described doing so as "wrong". To the OP: sorry. TomYoung wrote: > there's actually lots of > situations where you'd capitalize sales taxes. So, in my truck situation, I'd amortize the sales tax over the life of the truck? I guess I can see that, although I don't like it. The truck loses value over time, for sure, but the one-time expense of the sales tax is incurred all at once and is a function of the purchase action, not the life cycle of the good purchased. Knowing what to capitalize and what to expense was always more art than science if I remember correctly. But one factor was, I thought, whether or not the item/service being acquired had some enduring value. I can re-sell the truck, but I cannot transfer any worth to another person once I've paid the state its sales tax. The "value" of the disbursement instantly dissipates. > In > California, unprepared food items sold at supermarkets are not taxed > but ready-to-eat hot foods are taxed, as are soft drinks and cat > food. But, for my accounting, it's all "food" and the only way an > automatic allocation of sales tax could work is if I set up two > categories of "food" - maybe "food non-taxed" and "food taxed" I seem to recall living in jurisdictions where "children's" clothing was untaxed and "adult" clothing was taxed. Silly, and fraud-provoking. Doug
From: Doug on 19 Nov 2009 13:33 OK - Dad always said "when 2 people tell you you're drunk, go to bed", so I'll agree I was wrong about the undesirability of allocating sales tax expenses to the accounts of the goods being purchased. I still don't understand why anyone using Quicken would find this useful. If one is going to go to the trouble of finely categorizing their purchases, why not categorize the tax expenses, too? Do they blend their FICA and income tax back into their salary? But I don't need to understand why someone would wish to do so, and needlessly described doing so as "wrong". To the OP: sorry. TomYoung wrote: > there's actually lots of > situations where you'd capitalize sales taxes. So, in my truck situation, I'd amortize the sales tax over the life of the truck? I guess I can see that, although I don't like it. The truck loses value over time, for sure, but the one-time expense of the sales tax is incurred all at once and is a function of the purchase action, not the life cycle of the good purchased. Knowing what to capitalize and what to expense was always more art than science if I remember correctly. But one factor was, I thought, whether or not the item/service being acquired had some enduring value. I can re-sell the truck, but I cannot transfer any worth to another person once I've paid the state its sales tax. The "value" of the disbursement instantly dissipates. > In > California, unprepared food items sold at supermarkets are not taxed > but ready-to-eat hot foods are taxed, as are soft drinks and cat > food. But, for my accounting, it's all "food" and the only way an > automatic allocation of sales tax could work is if I set up two > categories of "food" - maybe "food non-taxed" and "food taxed" I seem to recall living in jurisdictions where "children's" clothing was untaxed and "adult" clothing was taxed. Silly, and fraud-provoking. Doug
From: Doug on 19 Nov 2009 13:38 > Even if tax laws allow you to deduct the sales tax you pay on your new > car or computer or shirt or candy bar, the tax on that transaction is > still a part of the cost - to you - of buying that property. > > Accounting theory has evolved over the centuries, but I suspect that, > even at the "University of Connecticut, many years ago", that is what > was being taught in accounting theory classes. That's what I was taught > at the University of Oklahoma in the 1950's (BBA in Accounting, 1956). > And I'm pretty sure that is what today's students are learning. > > RC Well, of course it is "part of the cost". Aren't some costs expensed? Aren't some costs booked in one account, while others to other accounts? Remember where this started: someone new to Quicken who wanted to categorize his expenses. I'm not disputing that sales tax is a cost. I am a little slow on the uptake here with the notion that sales taxes paid are an asset <grin>. Doug
From: ebloch on 19 Nov 2009 13:55
At one time the IRS, when itemizing deductions, allowed one to deduct EITHER State Income Tax OR State Sales Tax. If still true that would be one reason to maintain a seperate Sales Tax Category. "Doug" <Doug_Ellice(a)yho.com> wrote in message news:RbgNm.52801$gg6.3419(a)newsfe25.iad... > OK - Dad always said "when 2 people tell you you're drunk, go to bed", so > I'll agree I was wrong about the undesirability of allocating sales tax > expenses to the accounts of the goods being purchased. > > I still don't understand why anyone using Quicken would find this useful. > If one is going to go to the trouble of finely categorizing their > purchases, why not categorize the tax expenses, too? Do they blend their > FICA and income tax back into their salary? But I don't need to > understand why someone would wish to do so, and needlessly described doing > so as "wrong". To the OP: sorry. > > > TomYoung wrote: > > there's actually lots of > > situations where you'd capitalize sales taxes. > > So, in my truck situation, I'd amortize the sales tax over the life of the > truck? I guess I can see that, although I don't like it. The truck loses > value over time, for sure, but the one-time expense of the sales tax is > incurred all at once and is a function of the purchase action, not the > life cycle of the good purchased. Knowing what to capitalize and what to > expense was always more art than science if I remember correctly. But one > factor was, I thought, whether or not the item/service being acquired had > some enduring value. I can re-sell the truck, but I cannot transfer any > worth to another person once I've paid the state its sales tax. The > "value" of the disbursement instantly dissipates. > > > > > In > > California, unprepared food items sold at supermarkets are not taxed > > but ready-to-eat hot foods are taxed, as are soft drinks and cat > > food. But, for my accounting, it's all "food" and the only way an > > automatic allocation of sales tax could work is if I set up two > > categories of "food" - maybe "food non-taxed" and "food taxed" > > > I seem to recall living in jurisdictions where "children's" clothing was > untaxed and "adult" clothing was taxed. Silly, and fraud-provoking. > > Doug |