unofficial microsoft.public.money FAQ and A
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How to do things in Money: Accounts/Categories/Payees

Q) I've entered charges in my credit card account, when I pay the bill aren't I spending twice? Is my card a category or account?

A) These, and many other fundamentally related questions, are frequently asked by people new to personal finance software and formalized accounting methods.

There are two ways to approach this whole issue. Let's describe the more useful, and generally preferred, way first: You setup Accounts, not Categories, for the tools you use to spend money. I.e., setup accounts for your checking account and your credit card account(s).

When you spend on the cards, you record transactions in the credit card account for WHY you spent the money. E.g., $50 to MCI WorldCom for category:subcategory "Utilities:Long Distance."

When you pay the credit card bills, you "Transfer" money from, say, your Checking Account to your Visa Account. Paying a bill like this is not an expense. It's just taking money you have and applying it to expenses (i.e., liabilities) you already incurred--hence the transfer. The special category "Credit Card Payment" is just a less confusing (but less insightful) way to say "Transfer" and it behaves exactly the same except you can't create a scheduled "Credit Card Payment" but you can create a scheduled "Transfer" and it works exactly the same. M05 came along and added a new Expense Category "Credit Card Payments/Transfer" just to mess with anybody who is just starting to understand this stuff. As Cal Learner--MVP recommended, the best thing to do is probably to delete this category. It just causes confusion.

The second way, if you are not ready to dive in just yet, is to categorize the entire payment to the credit card as "Miscellaneous" and not worry about what, in turn, the credit card charges were for. In this scenario you don't even have to setup the credit card as a separate Account. If you really want to use Money to understand where the money comes from and goes to, don't do it this way; it masks what you are really spending the money for.

Money provides an intermediate path that can be simple to start while you are getting up and running and can easily morph into the recommended method. When you create the account, tell it you want to "AutoBalance" the account. (This is the same as the radio buttons "Account tracking: I want to track individual charges/Just track the amount I owe" on the Account Details page.) When AutoBalance is enabled, a "Credit Card Payment:[credit card account]" or the more normative "Transfer:[credit card account]" will popup a dialog box to balance the account. It will also do automagically what was outlined above as a manual task: it will enter an account adjustment transaction to expense the entire balance as "Miscellaneous."

There is much more on this in Help, the Help videos, Audio Help, and the book that came with Money. Also look at the sample file. The key hurdles for many people to cross are that: 1) Accounts are HOW you spend/receive money and are where individual expense and income transactions are recorded. 2) Categories and Subcategories are WHY you spend/receive money and are recorded as transactions in accounts. 3) Transfer is how you move Money from one account (say a cash account of which checking is one type) to another (say a liability account of which credit card is one type).

Please see this disclaimer if you are using Money 2005 or this comment if you are using Money 2006.

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