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My dad just gave me $4200 to pay for the college semester, and he expects nothing in return. I would like to correctly record this using double-entry bookkeeping.

Normally, I would just pay for college first, and then he would pay me. When I do this, I credit $4200 from my cash account, and debit $4200 to an account receivable. Then, when he gives me the money after I have paid for college, I would debit $4200 to my cash account, and credit $4200 from my account receivable. In this case, the account receivable ends up with a balance of $0.

However, this time he paid me before I paid for college. So if I recorded it as I normally would, I would debit $4200 to my account, and credit $4200 from an account receivable. But if I did this, the account receivable would end up with negative balance until I actually paid for college (when I would credit $4200 from my cash account, and debit $4200 to the account receivable).

So what would be the correct way to record this transaction?

  • This looks functionally the same as the recent question "How should I record a gift card". money.stackexchange.com/questions/132914/… – RonJohn Nov 18 '20 at 18:17
  • It certainly has similar aspects, but I feel that it's fundamentally different. Since in this case, I have a negative balance in an asset account (if I record the transaction as I normally would). But you don't have that in the case of the gift card. – Javier Castro Nov 18 '20 at 19:10
  • "this time he paid me before I paid for college." ISTM that's functionally equivalent to a $4200 debit card which you can only spend at University. – RonJohn Nov 18 '20 at 19:38

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