Can I use the same category for deposits and withdrawals?

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MoneyMagic
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Can I use the same category for deposits and withdrawals?

Post by MoneyMagic »

I am new to MoneyManagerEX, but please could someone explain why MMEX Help says "Do not use the same category for Deposit and Withdrawal transactions, as this will upset overall balance figures"?

For example:
  • If I spend £100 on clothing and return £50 of it for refund at a later date, can I make a withdrawal of £100 using the 'clothing' category, and then make a deposit of £50 using the 'clothing' category when I receive the refund?
  • If I borrow £200 from a friend which I repay a month later, can I make a deposit of £200 using my 'borrowed/lent' category, then make a withdrawal of £200 using the same category when I repay it?
Where would these scenarios upset the balance figures? Would they cause any of the reports to give misleading information?

paulcroft
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Re: Can I use the same category for deposits and withdrawals

Post by paulcroft »

I guess it depends how you do your accounting.  Me?  I use the same category where it makes sense, such as your example for clothing. If I spend £50 then return an item and get £20 back then my clothing category is down £30 and this is what it will show when a monthly/yearly tally is done which is how it should be as far as I can see.  Remember, MMEX is to help you with your accounting so use it however it suits you best.
Paul

MoneyMagic
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Re: Can I use the same category for deposits and withdrawals

Post by MoneyMagic »

Thanks Paul, the example you give where the clothing category shows a net withdrawal of £30 is the way I want MMEX to report, so that answers my question. I just wanted to be sure I wasn't missing something, because the Help section advises against this.

As you point out, it's down to how it suits you best. In some circumstances I can see why I wouldn't want to do this...

An example where I would NOT want to use the same category for deposits and withdrawals is Gifts. For example, if I give £50 to charity and someone gives me a £50 birthday present, if I used the same category for both transactions, they would cancel each other out giving the impression that I had neither given or received anything. So instead I use a category for Income:Gifts and a category for Gifts:Charity. I notice this was the example in question in this thread:  http://forum.moneymanagerex.org/viewtopic.php?f=5&t=5710&hilit=gift+category

paulcroft
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Re: Can I use the same category for deposits and withdrawals

Post by paulcroft »

MoneyMagic wrote:Thanks Paul, the example you give where the clothing category shows a net withdrawal of £30 is the way I want MMEX to report, so that answers my question. I just wanted to be sure I wasn't missing something, because the Help section advises against this.

As you point out, it's down to how it suits you best. In some circumstances I can see why I wouldn't want to do this...

An example where I would NOT want to use the same category for deposits and withdrawals is Gifts. For example, if I give £50 to charity and someone gives me a £50 birthday present, if I used the same category for both transactions, they would cancel each other out giving the impression that I had neither given or received anything. So instead I use a category for Income:Gifts and a category for Gifts:Charity. I notice this was the example in question in this thread:  http://forum.moneymanagerex.org/viewtopic.php?f=5&t=5710&hilit=gift+category
One of the joys is being to create any category you want and charity is a good example, if only because gifts to charities are tax exempt so it's useful/necessary to know, at year's end, how much you've given.  I keep gifts and charities as two very separate categories :-).
Paul

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MisterY
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Re: Can I use the same category for deposits and withdrawals

Post by MisterY »

Just to confirm the conclusions. You are free to organize your personal finances any way you'd like. Meaning, the original categories are only a suggestion and a way to jumpstart the app.
Also, looking at other personal finance applications shows that they come with "Gifts Given" and "Gifts Received" categories. This absolutely correlates with your conclusions regarding tax treatment or simply different purpose for these transactions.

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