Why is the ability to have a split transaction (e.g. one transaction, but categorized into two or more parts) beneficial to personal finance management software?
What are the most typical use-cases for split transactions?
Split transactions are indispensable to anybody interested in accurately tracking their spending.
If I go to the big-box pharmacy down the road to pick up a prescription and then also grab a loaf of bread and a jug of milk while there, then I'd want to enter the transaction into my software as:
I desire entering precise data into the software so that I can rely on the reports it produces.
Often, I don't need an exact amount and estimated category totals would have been fine, e.g. to inform budgeting, or compare to a prior period.
However, in other cases, the expenses I'm tracking must be tracked accurately because I'd be using the total to claim an income tax deduction (or credit). Consider how Internet access might be commingled on the same bill with the home's cable TV service. One is a reasonable business expense and deduction for the work-at-home web developer, whereas the other is a personal non-deductible expense.
Were split transaction capability not available, the somewhat unattractive alternatives are:
Ignore the category difference and, say, categorize the entire transaction as the larger or more important category. But, this deliberately introduces error in the tracked data, rendering it useless for cases where the category totals need to be accurate,
Split the transaction manually. This doesn't introduce error into the tracked data, but suffers another problem: It makes a lot of work.
First, one would need to manually enter two (or more) top-level transactions instead of the single one with sub-amounts. Perhaps not that much more work than if a split were entered.
Worse is when it comes time to reconcile: Now there are two (or more) transactions in the register, but the credit card statement has only one. Reconciling would require manually adding up those transactions from the register just to confirm the amount on the statement is correct. Major pain!
I'd place split transaction capability near the top of the list of "must have" features for any finance management software.