Silly accounting question [How do I record these transactions?]

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Jags4186
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Silly accounting question [How do I record these transactions?]

Post by Jags4186 » Sat Oct 14, 2017 10:14 am

I’m incredible anal about tracking my income and expenses. What is the “correct” way to record these types of transactions...I’ll tell you how I do it for reference.

I buy tires for $400. $400 expense

I buy tires for $400. I have a $20 off coupon. I pay $380. $380 expense.

I buy tires for $400. I submit a form to get a $100 mail in rebate. The rebate shows up 12 weeks later. $400 expense, $100 income.

I buy tires online for $400 and I get a $20 rebate through “AMEX offers”. The rebate shows up immediately on my statement but as a separate transaction. $400 expense, $20 income.

Is this the right way to look at things? I ask because I probably have $2000 - $3000/yr with these types of transactions and am curious how I should be tracking them.

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prudent
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Re: Silly accounting question

Post by prudent » Sat Oct 14, 2017 10:21 am

For rebates just enter them as a negative expense when they arrive. They are not income.

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KlingKlang
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Re: Silly accounting question

Post by KlingKlang » Sat Oct 14, 2017 10:23 am

If you really want to get anal about it you should treat your car as a capital asset and depreciate it every month. Be sure to subtract the residual value of the old tires from the asset. The $400 tires would be an addition to the asset but the labor to mount them would be an automobile expense. Sales tax is a separate tax category expense. Likewise the coupons/rebates on the tires would be an adjustment to the asset. Now you know how I keep myself busy all day.

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Majormajor78
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Re: Silly accounting question

Post by Majormajor78 » Sat Oct 14, 2017 10:32 am

The IRS does not count it as income. It's considered a post-purchase discount and is therefore not taxable. Same goes for those cash back credit cards so many people have in their wallets.
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Jags4186
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Re: Silly accounting question

Post by Jags4186 » Sat Oct 14, 2017 10:48 am

KlingKlang wrote:
Sat Oct 14, 2017 10:23 am
If you really want to get anal about it you should treat your car as a capital asset and depreciate it every month. Be sure to subtract the residual value of the old tires from the asset. The $400 tires would be an addition to the asset but the labor to mount them would be an automobile expense. Sales tax is a separate tax category expense. Likewise the coupons/rebates on the tires would be an adjustment to the asset. Now you know how I keep myself busy all day.
I do depreciate it in so much as every month I update their value based on KBB amount and mileage. Tires in it of themselves don’t need to be depreciated as they are now part of the car and share in its depreciation. I would never sell the tires separately from the car, just as I wouldn’t sell the radiator in my car. I either sell the car and all it’s components, or I keep it.

Also, I am not trying to calculate my income/expenses from an IRS standpoint, but rather from a cash flow standpoint.

For example if I require $40,000/yr to live, $1,000,000 is my [number - moderator prudent]. Now if I have $40,000 in expense and get $3,000 in rebates that equals $37,000 in annual expenses, my [number - moderator prudent] is $925,000. But there is no guarantee I can continue to hunt out $3000 in savings year after year, hence why I like to track the full cost of items without rebates.

I definitely consider credit card cashback income—just as I would checking account bonuses income. Regardless of whether or not I’m paying tax on them. No different than if I found $100 lying on the street. That’s income even though I’m not filling out a 1099 for it.

CppCoder
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Re: Silly accounting question

Post by CppCoder » Sat Oct 14, 2017 12:58 pm

For your purposes, I would probably just create a new column called discounts and track it independently from expenses and income. Just like you don't want to delude yourself into thinking items cost less than "face value" when considering future expenses, you don't want to inflate your income when thinking of future income. If you list a new column for discounts, you'll know the face value of items and how much you saved. Obviously, from a cash flow standpoint, the column will add in as a positive, just like income.

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welderwannabe
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Re: Silly accounting question

Post by welderwannabe » Sat Oct 14, 2017 4:20 pm

In quicken, when I log the deposit of the rebate check, I would put it against the Auto category. That way when I track my spending, it will end up showing the net auto expenses properly.

I do most of my own auto repair, and I do the exact same thing when I return my cores and get the core charge refunded. This is no different in my mind.
I am not an investment professional, but I did stay at a Holiday Inn Express last night.

MrJones
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Re: Silly accounting question [How do I record these transactions?]

Post by MrJones » Sat Oct 14, 2017 10:55 pm

Are you using single entry or double entry bookkeeping?

If the former, it's as simple as someone said above. Use an extra column to track discounts.

If you are anal at all, you would use double entry bookkeeping. It's almost built for tracking expenses in a way that can answer these questions easily. You have several options to track discounts with double entry bookkeeping.

1. If you do not want your income to change, say because you want your income to match IRS income, you can book discounts as a negative expense, with the undiscounted price as the actual expense. Say under expenses:coupons. You can simply look at that account anytime to know how many does concert got for a time period.

Liabilities: Credit Card. -$380
Expenses: Coupons -$20
Expenses: Car $400

2. You could book coupons under an income category which I do precisely for the purposes you mentioned:

Liabilities: Credit Card. -$380
Income: Coupons -$20
Expenses: Car $400

3. Rebates are first booked to an assets category as long as they are pending, so you can easily track them until they are received, and then transferred to your checking account at when you deposit the check. This is probably not greatly relevant to your original question

Personally, if it's a discount that I can easily get or a discount I would have waited for anyway, I don't book it separately in order to simplify.

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