Fund Accounting

[Pam]

I am still working my way through how the Fund Accounting works and I have another question.

If I have set up a Fund Account for Student Registration Fees, at a high contribution fund number, say 2500, so it would not be included in contribution reports...

In the Maintain Contribution Funds, would I want to put the EXPENSE account number for this line item as the account to credit, instead of the Income account, so the registration fees will wash with the payment made to the camp?

Thanks!

[JohnDMeyers]

Pam:

This is a pass-through amount.

If the camp is not-for-profit, you could set up a liability account for the credit account, because you "owe" the money to the camp.

The contribution fund would look like this:
DB checking
CR liability

When you pay the camp:
CR checking
DB liability

The "wash" occurs in the liability account and doesn't affect your income and expense statement at all.

[Pam]

I would not have thought of that as a pass through. That makes it a lot simpler.

So it would be best not use a fund account at all for camp registration payments.

If I pay the camp before the full payments are received from the campers, would I go ahead and pay from the pass through account, creating a negative liability, until funds are received?

Thank you!

[JohnDMeyers]

Depends on how certain you are that you will receive the remaining contributions. If 100% certain, a negative liability isn't inherently bad.

Otherwise, you can cut a check each time a payment comes in.

[Pam]

If we come close, but don't realize the full income payment to the camp, I can pay what we have from pass thru contributions and the remainder from the expense account. Or transfer from expense to cover the negative liability. Will that be acceptable?

[JohnDMeyers]

At very least, you're going to need to CR the checking.

If you were off by $20.00 you could
CR checking $20.00
DB liability $20.00

but there would be no record, other than the account activity on the checking account and liability account, that the church kicked in $20.00 extra.

[wms7328]

I handle all the things like this by using a separate accounting fund as a pass through account. Record all the income and expenses for items such as camps, books, events where church buys tickets, etc. in this account. Then at end of the event, or I do it at the end of the year, you can see if your inome and expense balance for each item. I then either transfer the excess income or expense, usually expense, to our operating account to make the pass through account income and expenses equal at the end of the accounting year.

I found that this takes all this cash flow out of your regular operating expenses and income reports. You can use the same checking account for this fund. If you are new to fund accounting, review how to set up a separate accounting fund. It's the first two numbers of all the account numbers. Send me another message if you want to use this method and I can send you a copy of my chart of accounts for this fund.

[Pam]

I would like to see your chart of accounts for how you set up a separate accounting fund. I am interested in looking at how this is done. I will also review my manual to better understand what you are saying. It makes sense that you would not want to include these funds in your daily cash flow and it sounds like it would be more easily reconciled. If you would like to email it to me.

Thank you!

[NeilZ]

Just a quick note to all:

Its not a good idea to include your personal email address on the forum. It can be picked up by spammers.

You can email the writer of a post by clicking on the EMAIL button on any post the person has written. In this way, you can communicate without having to reveal any email address publically.

[Pam]

Oops! Thank you, Neil! Sorry about that.

[NeilZ]

Oops! Thank you, Neil! Sorry about that.

You're welcome ... nothing to be sorry about, just a reminder to keep you safe from SPAM.

[kayanat]

Accounting: Large Education Org: remove any fund's small remainder balances? What method would be used to remove any fund's small remainder balances from the individual fund account register? Where can they be moved; is it "Cash" journal? A small balance carry over? In "small" business we always push it into the cash journal without explanation as "administrative" expense. What is common in large non-profit groups?

[Eden Whitehead]

I handle all the things like this by using a separate accounting fund as a pass through account. ... I then either transfer the excess income or expense, usually expense, to our operating account to make the pass through account income and expenses equal at the end of the accounting year.

When you say you "transfer" the excess income/expense, do you mean using (for example) the 9000 range of account numbers (Transfer to/Transfer from)? I've been using 2000 range accounts for things like Easter lilies and poinsettias at Christmas, etc.

Eden

[wms7328]

As example, lets say you received 200 dollars for flowers that you recorded as income in your pass through fund and the flower expenses were 250 dollars at the end of the accounting year. You would like for income and expenses for each item in your pass through account to be equal at end of accounting year. This keeps a positive or negative fund balance from building up through the years.

I would record a transaction like this, Assume pass though account is Fund 10 and normal operating is Fund 01. I'll just make up some accont Numbers

10-1120 Asset Checking Account- Debit 50.00
10-5050 Flower Expense - Credit 50.00
01-1120 Asset Checking Account- Credit 50.00
01-5050 Flower Expense - Debit 50.00

This effectively transfers the $50 of excess flower expense back to the normal operating fund. It makes the income and expense in the pass though fund equal and shows up as a normal expense in operating account. I then explain where this expense originated in the comments section for the auditors.

Hope this explains the process I use.

[Eden Whitehead]

As example, lets say you received 200 dollars for flowers that you recorded as income in your pass through fund and the flower expenses were 250 dollars at the end of the accounting year. You would like for income and expenses for each item in your pass through account to be equal at end of accounting year. This keeps a positive or negative fund balance from building up through the years.

I would record a transaction like this, Assume pass though account is Fund 10 and normal operating is Fund 01. I'll just make up some accont Numbers

10-1120 Asset Checking Account- Debit 50.00
10-5050 Flower Expense - Credit 50.00
01-1120 Asset Checking Account- Credit 50.00
01-5050 Flower Expense - Debit 50.00

This effectively transfers the $50 of excess flower expense back to the normal operating fund. It makes the income and expense in the pass though fund equal and shows up as a normal expense in operating account. I then explain where this expense originated in the comments section for the auditors.

Thank you for the information. Your explanation is very clear, thorough and helpful.

I am thinking about switching our few pass-through accounts to this method. Does anyone have any comments about the relative merits of using a separate fund as described here vs. using a liability account in the general fund? For example, what are the implications for monthly reports?