Double-entry bookkeeping: How to account for non-monetary taxable benefits received from employer?
"I can say that I got X dollars from an account like ""Income:Benefits""... but where do I credit that money to? ""Expenses:Groceries"" Yes doesn't feel right, since I never actually spent that money on food,  You did, didn't you? You got food. I'm guessing there's an established convention for this already?  Doubt it. Established conventions in accounting are for businesses, and more specifically - public companies. So you can find a GAAP, or IFRS guidelines on how to book benefits (hint: salary expense), but it is not something you may find useful in your own household accounting. Do what is most convenient for you. Since it is a double-booking system - you need to have an account on the other side. Expenses:Groceries doesn't feel right? Add Expenses:Groceries:Benefits or Expenses:Benefits or whatever. When you do your expense and cash-flow reports - you can exclude both the income and the expense benefits accounts if you track them separately, so that they don't affect your tracking of the ""real"" expenses."
In my opinion, every person, regardless of his or her situation, should be keeping track of their personal finances.  In addition, I believe that everyone, regardless of their situation, should have some sort of budget/spending plan. For many people, it is tempting to ignore the details of their finances and not worry about it.  After all, the bank knows how much money I have, right?  I get a statement from them each month that shows what I have spent, and I can always go to the bank's website and find out how much money I have, right?  Unfortunately, this type of thinking can lead to several different problems. Overspending.  In olden days, it was difficult to spend more money than you had.  Most purchases were made in cash, so if your wallet had cash in it, you could spend it, and when your wallet was empty, you were required to stop spending.  In this age of credit and electronic transactions, this is no longer the case.  It is extremely easy to spend money that you don't yet have, and find yourself in debt.  Debt, of course, leads to interest charges and future burdens. Unpreparedness for the future.  Without a plan, it is difficult to know if you have saved up enough for large future expenses.  Will you have enough money to pay the water bill that only shows up once every three months or the property tax bill that only shows up once a year?  Will you have enough money to pay to fix your car when it breaks?  Will you have enough money to replace your car when it is time?  How about helping out your kids with college tuition, or funding your retirement?  Without a plan, all of these are very difficult to manage without proper accounting.   Anxiety.  Not having a clear picture of your finances can lead to anxiety.  This can happen whether or not you are actually overspending, and whether or not you have enough saved up to cover future expenses, because you simply don't know if you have adequately covered your situation or not.  Making a plan and doing the accounting necessary to ensure you are following your plan can take the worry out of your finances. Fear of spending.  There was an interesting question from a user last year who was not at all in trouble with his finances, yet was always afraid to spend any money, because he didn't have a budget/spending plan in place.  If you spend money on a vacation, are you putting your property tax bill in jeopardy?  With a good budget in place, you can know for sure whether or not you will have enough money to pay your future expenses and can spend on something else today. This can all be done with or without the aid of software, but like many things, a computer makes the job easier.  A good personal finance program will do two things: Keeps track of your spending and balances, apart from your bank.  The bank can only show you things that have cleared the bank.  If you set up future payments (outside of the bank), or you write a check that has not been cashed yet, or you spend money on a credit card and have not paid the bill yet, these will not be reflected in your bank balance online.  However, if you manually enter these things into your own personal finance program, you can see how much money you actually have available to spend. Lets you plan for future spending.  The spending plan, or budget, lets you assign a job to every dollar that you own.  By doing this, you won't spend rent money at the bar, and you won't spend the car insurance money on a vacation. I've written before about the details on how some of these software packages work.  To answer your question about double-entry accounting: Some software packages do use true double-entry accounting (GnuCash, Ledger) and some do not (YNAB, EveryDollar, Mvelopes).  In my opinion, double-entry accounting is an unnecessary complication for personal finances.  If you don't already know what double-entry accounting is, stick with one of the simpler solutions. "If they directly paid for your education, it is possible that it wouldn't count as taxable income to you according to the IRS, depending on the amount: If you receive educational assistance benefits from your employer   under an educational assistance program, you can exclude up to $5,250   of those benefits each year. This means your employer should not   include those benefits with your wages, tips, and other compensation   shown in box 1 of your Form W-2. This also means that you do not have   to include the benefits on your income tax return. source: http://www.irs.gov/publications/p970/ch11.html However, your situation is a bit trickier since they are sort of retroactively paying for your education. I'd think the answer is ""Maybe"" and you should consult a tax professional since it is a gray area.  Update: On further research, I'm going to downgrade that ""Maybe"" to ""Probably not, but hopefully soon."" The reason I am doing so is that there is a bill in Congress specifically to allow what you are asking, which presumes that you currently can't do this.  The Bill is HR Bill 395 ""The Student Loan Employment Benefits Act of 2013"" sponsored by rep Steve Israel (D). It has co-sponsors from both parties, so that is promising for it's passage, I suppose. However, it appears to be still early in the legislative process. If this issue is near/dear to your heart maybe you should call your congressman. Summary of the Bill: (from govtrack.us) Student Loan Employment Benefits Act of 2013 - Amends the Internal   Revenue Code to exclude from the gross income of an employee amounts   paid by an employer under a student loan payment assistance program.   Limits the amount of such exclusion to $5,000 in a taxable year. Requires an employer student loan payment assistance program to be a   separate written plan of an employer to provide employees with student   loan payment assistance.  Defines ""student loan payment assistance"" as   the payment of principal or interest on any indebtedness incurred by   an employee solely to pay qualified higher education expenses which   are paid or incurred within a reasonable time before or after such   indebtedness was incurred and are attributable to education furnished   during a period in which such employee was a student eligible for   federal financial assistance." The IRS defines income quite specifically. On the topic What is Taxable and Nontaxable Income, they note: You can receive income in the form of money, property, or services. This section discusses many kinds of income that are taxable or nontaxable. It includes discussions on employee wages and fringe benefits, and income from bartering, partnerships, S corporations, and royalties.  Bartering, or giving someone wages (or similar) in something other than currency (or some other specifically defined things, like fringe benefits), is taxed at fair market value: Bartering Bartering is an exchange of property or services. You must include in your income, at the time received, the fair market value of property or services you receive in bartering. For additional information, Refer to Tax Topic 420 - Bartering Income and Barter Exchanges. Bartering is more specifically covered in Topic 420 - Bartering Income: You must include in gross income in the year of receipt the fair market value of goods or services received from bartering. Generally, you report this income on Form 1040, Schedule C (PDF), Profit or Loss from Business (Sole Proprietorship), or Form 1040, Schedule C-EZ (PDF), Net Profit from Business (Sole Proprietorship). If you failed to report this income, correct your return by filing a Form 1040X (PDF), Amended U.S. Individual Income Tax Return. Refer to Topic 308 for information on filing an amended return. More details about income in general beyond the above articles is available in Publication 525, Taxable and Nontaxable Income.  It goes into great detail about different kinds of income. In your example, you'd have to calculate the fair market value of an avocado, and then determine how much cash-equivalent you were paid in.  The IRS wouldn't necessarily tell you what that value was; you'd calculate it based on something you feel you could justify to them afterwards.  The way I'd do it would be to write down the price of avocados at each pay period, and apply a dollar-cost-averaging type method to determine the total pay's fair value.   While the avocado example is of course largely absurd, the advent of bitcoins has made this much more relevant.  Publication 525 has this to say about virtual currency: Virtual Currency.   If your employer gives you virtual currency (such as Bitcoin) as payment for your services, you must include the fair market value of the currency in your income. The fair market value of virtual currency (such as Bitcoin) paid as wages is subject to federal income tax withholding, Federal Insurance Contribution Act (FICA) tax, and Federal Unemployment Tax Act (FUTA) tax and must be reported on Form W-2, Wage and Tax Statement. Gold would be fundamentally similar - although I am not sure it's legal to pay someone in gold; assuming it were, though, its fair market value would be again the definition of income.  Similarly, if you're paid in another country's currency, the US dollar equivalent of that is what you'll pay taxes on, at the fair market value of that currency in US dollars. "Other responses have focused on getting you software to use, but I'd like to attempt your literal question: how are such transactions managed in systems that handle them? I will answer for ""double entry"" bookkeeping software such as Quicken or GnuCash (my choice). (Disclaimer: I Am Not An Accountant and accountants will probably find error in my terminology.) Your credit card is a liability to you, and is tracked using a liability account (as opposed to an asset account, such as your bank accounts or cash in your pocket). A liability account is just like an asset except that it is subtracted from rather than added to your total assets (or, from another perspective, its balance is normally negative; the mathematics works out identically). When you make a purchase using your credit card, the transaction you record transfers money from the liability account (increasing the liability) to the expense account for your classification of the expense. When you make a payment on your credit card, the transaction you record transfers money from your checking account (for example) to the credit card account, reducing the liability. Whatever software you choose for tracking your money, I strongly recommend choosing something that is sufficiently powerful to handle representing this as I have described (transfers between accounts as the normal mode of operation, not simply lone increases/decreases of asset accounts)." If you are in the US and a regular employee, this will have to show up on your year-end W2 form as income. If it doesn't, there is some funky accounting business going and you should probably consult a professional for advice. Not correct. First - when you say they don't tax the reimbursement, they are classifying it in a way that makes it taxable to you (just not withholding tax at that time).  In effect, they are under-withholding, if these reimbursement are high enough, you'll have not just a tax bill, but penalties for not paying enough all year.  My reimbursements do not produce any kind of pay stub, they are a direct deposit, and are not added to my income, not as they occur, nor at year end on W2.  Have you asked them why they handle it this way? It's wrong, and it's costing you. Every bill you write counts as income (if the bill doesn't get paid, you would count that as an expense). In cases where you don't write bills, I think the payment you receive would count as income, but you might check that on the HMRC website. So to record your income, you can basically record the payments that you receive.  Anything you pay out for your business is an expense. You keep a receipt for every expense - if you don't have a receipt, you can't count it as an expense, so keeping all the receipts is very, very important. An exception are investments, for example buying a computer that should last multiple years; there you can count a percentage of the investment as expense every year.  All income, minus all expenses, is your profit. You pay tax and National Insurance contributions according to your profit. You can do whatever you like with the profit.  Notice that I didn't mention any salary. Self employed means you have no salary, you have profits and do with them whatever you like. On the other hand, you pay taxes on these profits almost exactly as if they were income.  If you have this blog but are also employed, you'll add the profits to your normal income statement. You already received a tax deduction, more or less, as you didn't pay tax on this income. Beyond that, no; the money is lost if you don't spend it.  See this explanation for example, among many others; it's specific to FSA, but they work generally the same way. To go into a bit more detail, read the IRS publication on the subject; basically, what's happening here is that you're receiving a fringe benefit, rather than salary.  So yes, you agreed to voluntarily reduce your salary by $255 or whatever per month in exchange for funds in this account. As such, they're nontaxable, which both your employer and you find helpful; but the downside is it's not really your money - it's a fringe benefit.  Nice that it's tax free, and dissimilar to a medical or dependent care FSA, it doesn't have an expiration date; but it does go away when you leave your employer, and you don't get it back.  It's money you never had.