Vehicle Asset, Loan, and payments

@UrsulaA

I appreciate your response, but from an accounting standpoint, when you make a loan payment, one is paying down the balance on the loan. The expense portion comes in when you take depreciation on the car. I'm coming from a formal accounting background (you know, debits on the left, credits on the right), so I'm trying to understand or visualize what Simplifi is doing. I've read the articles on how to set up assets and liability accounts… but what those articles are saying doesn't align with traditional accrual basis account. LOL.

@UrsulaA - appreciate the assistance, I didn't expect Simplifi to be doing accrual based accounting, its just what I'm familiar with and understand.

So we're clear my original question was not about accrual vs cash basis… it was about trying to understand what Simplifi is doing when: 1) setting up an asset, 2) setting up a liability, 3) recording a payment from your bank account on a liability, and 4) how those pieces fit and work together in Simplifi.

After all, whether its cash basis or accrual basis account, there still has to be debits and credits to every transaction and I would like a better understanding of what Simplifi is doing. 😁

@Coach Jon , yes those steps make sense, but it doesn't explain what's happening to the various balances within Simplifi. I'm not trying to be difficult, so I apologize if it seems that way. I just want to be able to understand how Simplifi records various transactions so that I have confidence that I'm entering things correctly and so that I can best leverage Simplifi to help me get the most out of it.

I've been reading through the many Simplifi articles in the help center and I'm starting to piece things together, but I'm still not able to connect all the dots.

I've been seeing some terms in the help center articles which seem to occur quite often:

• Net Worth: assets minus liabilities
• Expense Category: decrease Net Worth
• Income Category: increase New Worth
• Transfers (between accounts): no affect on Net Worth

Do I have the correct interpretation of these terms from the Simplifi perspective? Hopefully I do, if not, hopefully you can take some time to give additional details / insights.

So, in my mind, when

• Simplifi creates a transaction when it retrieves the latest transaction data from my Bank
• or I create an Liability account or Asset account
• or Simplifi updates the the balance of a Liability account when it retrieves the latest details from my financial institution

I'm trying to understand what happens in terms of Net Worth, Expenses, Income, etc.

Let use some examples to help me understand and hopefully you can explain in terms of Net Worth, Expenses, Income terms what Simplifi does. Let's assume we are starting off with a brand new set of Simplifi accounts containing no transactions. Further assume that the activities below are the only transactions that Simplifi will capture.

1. I add a brand new bank account in Simplifi with no previous/opening balance
2. I open a brand new checking account and deposit $8000 and link it to the above Simplifi bank account
3. I open a new credit card account with no previous/opening balance
4. I add the above credit card account in Simplifi
5. My paycheck is deposited into my checking account, an amount of $3500
6. I buy a cup of coffee at Starbucks for $5 and pay cash
7. I go out for dinner at an expensive stake house and charge $100 to my credit card
8. I purchase a use car and take out a loan for $4000
   1. I would like to track the Loan balance which starts at $4000
   2. I would like to manually create asset account for the purchase price of the car $4000
9. Another paycheck is deposited into my checking account, an amount of $3500
10. I add a Savings account to Simplify which has a pre-existing balance of $20,000
11. I make a car payment by writing a check for $150, the check clears the bank.
12. I pay my credit card balance in full by writing a check for $100, the check clears the bank.
13. I go to the Kelley Blue Book web site and look up the value of my used car, it has dropped by $80. I want to record a transaction that will reflect the decrease of value in the asset account.
14. Simplify connects to my Bank, Credit Card company and the Financial Institution whom I have the auto loan with and downloads all activity.

So, for each of the above, can we list out what accounts, liabilities, expense categories, income categories would be affected and what the impact on net worth would be?

@Coach Jon , unfortunately it doesn't really help me. I guess I'm assuming that Simplifi uses Double-Entry Bookkeeping, is this a correct assumption?

to quote from the above link:

Double-entry bookkeeping is an accounting method where each transaction is recorded in 2 or more accounts using debits and credits. A debit is made in at least one account and a credit is made in at least one other account. The total debits and credits must balance (equal each other).

There are 3 major components to the double-entry method in bookkeeping. They are:

1. Every business transaction or accounting entry has to be recorded in at least two accounts in the books.
2. For each transaction, the total debits recorded must equal the total credits recorded.
3. Total assets must always equal total liabilities plus equity (net worth or capital) of a business. Both sides of this equation must be the same (they must balance).

going back to the list of transactions I gave above, they are, as best as I can determine… Assets are Green, Liabilities are Red, Incomes are Light Green, Expenses are Pink. The categories / accounts I couldn't figure out with Simplify I've indicated with red bold text with a red boarder. These are the ones I'm hoping you, @Coach Jon, can fill in the missing pieces. Internally, Simplifi must be doing something with these unknowns. I would really appreciate it if you could tell me what.

From the Assets / Liabilities side:

@Coach Natalie, Thank you for response. I really do appreciate all the responses that the coaches and other users here have provided. It is helping me understand how Simplifi works, but perhaps not at the level of detail that I'd like.

its kind of funny that you say: "Although we wouldn't be able to tell you what kind of accounting method is used by Quicken Simplifi from a Care Team perspective" — I'm curious, why wouldn't you be able to tell, and why does the perspective of "a Care Team" affect that ability? I'm certainly not trying to get anyone to divulge Quicken trade secrets, LOL 🤣

From what I've been reading elsewhere and what people have said here, it sounds as if double-entry booking keeping is not being used…. and that net worth is, as you said, the sum of all account balances. But the amounts used for those balances are taken from the financial institutions that account activity is being downloaded from.

I'm still perplexed by the fact when you create a liability account for a car loan, that there is no asset account created in the same transaction. I don't understand why one has to manually create the asset account and when one does so, the other side of the transaction is put to something called Balance Adjustment, what's that, it not a category that you can see or an account either as far as I can tell.

I guess i'm left with some doubts with regards to the statement "Since transactions impact the balance of your accounts, they will ultimately impact your net worth", for a couple or reasons: like there is no running balance for accounts, that there is no automated process to reconcile accounts (I know there is the reviewed and flag columns that can be used for this purpose, but its manual), that payment activities on loan accounts is not shown as transactions. But payments reducing the checking count balance when a loan payment is made are shown as increasing the car expense, are shown. This is in contradiction to how payments of credit cards are handled as a transfer, why wouldn't payments of car loans be considered a transfer as well. This inconsistency is part of why I'm having a hard time making sense of things.

in the Asset Tracking in Quicken Simplify article, I'm confused by several statements in there. I am paraphrasing statements from the article below…

1. Asset Accounts are tracked manually so we need to update the value of the asset manually too by entering a new transaction in the account that accommodates the difference in value. What category should we use, for example when we check on the value of a car and need to adjust down its value? It's not really an expense, as no cash has been spent.
2. When selling an asset, you can mark the asset account to closed, which will bring the balance of the Asset Account down to $0, while still retaining the historical data. Where does the balance go? What category or account does it affect?
3. Additionally, when selling a vehicle, you will have transaction show up in your Checking Account recording the deposit. What category or account should the deposit get put in? For example, the asset account list the car at $1000, you sell it for $900, is that amount considered income? Is the $100 considered an expense?

I really like Simplifi, I think it's a great product, I'm just left with a lot of questions when I read the various articles. Unfortunately I'm one. of those people who want to understand what's going on so I can: predict what the product will do when I perform certain actions in it, and be able to validate that the results are correct (or that I've done something incorrectly). And also so that I can have faith in the product and rely on and make sense of what it's telling me.

Thanks again for your's and everyone else's continued patients with all my questions. 😁