up vote 3 down vote favorite

I'm using double entry with Assets, Expenses, Income, Liabilities, and Equity.

To illustrate my question with easy round numbers: Income one month is 10k; 5k goes into an asset like a 401k account (or to reduce a Liability, like a mortgage principal), and Expenses are 8k. (Doh!)

I'm looking for a report that shows me that I have a cash flow problem.

"Cash Flow", "Profit & Loss", "Balance Sheet", "Net Worth", etc. all don't show me that I have a problem (they say I'm spending 2k less than I'm making, and my net worth is going up by 2k/month, etc.).

Is there a standard report that should show me what I'm looking for? Or is there a typical adjustment made to some report that will show what I'm looking for?

Tabular concrete (very exaggerated and simplified of course) example:

Starting Balances (years ago)     Withdraw  Deposit
  Asset: Checking                              100
  Liability: Loan                    50
  Equity                             50
Make Money        (today)
  Asset: Checking                              10
  Income: Sell Stuff                 10
Pay Loan          (today)
  Asset: Checking                    13
  Liability: Loan                              5
  Expenses: Interest Paid                      8

Do I just need to "close the books" frequently so that I can see this isn't sustainable?

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  • "and my net worth is going up by 2k/month" If so, then you're doing it wrong. That's because the $3K expenses you didn't pay from current income ($5K + $8K - $10K = $3K) must be accounted for on your balance sheet and net worth statement. It's debt (either in the form of unpaid bills or unpaid CC charges). – RonJohn Feb 6 at 8:48
  • Perhaps I am doing something wrong, that's why I'm asking.... BUT: no, the money is actually coming from an existing asset account (e.g. a checking account that has surplus from last month). In effect, I'm just moving 5k from a fluid asset to a 401(k) asset (for instance), so that has no effect on net worth. I bring in 10k, spend 8k, and move 5k from one account to another. Net increase is 2k. – Bob Walters Feb 6 at 13:30
  • I must be interpreting your question incorrectly. Please add a specific example in tabular form to your question. – RonJohn Feb 6 at 14:09
  • added a table :) – Bob Walters Feb 6 at 15:58
  • @BobWalters Are you just trying to look at a graph of your checking account balance over time? Or are you looking for something more complex than that? – Peter Cooper Jr. Feb 6 at 20:10
up vote 2 down vote accepted

Your cash flow report is where the problem should be manifested. If you were a business, I would expect to see $2k of operating cash flow (revenue minus expenses) and -$5K of Investing/Financing cash flow (cash moved to increase an asset/reduce a liability), for a net change in cash of -$3k.

If your cash flow statement does not indicate this, then your cash flow report is wrong. Is your 401(k) possibly considered a cash account rather than an asset/investment?

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  • Hmm: might be on to something. I'm using gnucash. Yes, looks like the cash flow report is showing the mortgage liability reduction as it should, and in fact the retirement accounts were listed as Bank accounts. So I changed those accounts to be Asset accounts. But they're still not showing up when I regenerate the Cash Flow report. This helps though. It suggests that the Cash Flow report is the answer, and that I need to figure out how to get gnucash to treat those accounts right. Cool - thanks! – Bob Walters Feb 6 at 16:10
  • @BobWalters this is why I use spreadsheets: double-entry accounting, while simple in concept, gets confusing in details. One spreadsheet tracks my (current and future) cash, and the other tracks my assets and liabilities/debts. The Cash Flow sheet is essentially a check register that looks forward into the future, and I always keep it up to date. Net Worth is updated monthly. Balance sheet and P&L are meaningless for a worker bee. – RonJohn Feb 6 at 17:24

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