Posting Transactions

[RLM]

I am still struggling with this issue, so any help would be greatly appreciated.

Scenario: In January, 2009 I receive an Invoice dated 12/19/2008 for $13.14 to a local bookstore. I want the expense to show in December because that is a true reflection of the expense. However when I cut the check is is showing 01/07/2009. Is this the proper way to show this expense? I don't feel right about dating the check for 12/19/2008 when it was 'actually' written on 01/07/2009.

Feedback appreciated.... how does everyone else handle this?

[JohnDMeyers]

I think you're wrestling with an issue about cash accounting (versus accrual accounting).

In cash accounting, you don't record a payment until it is actually paid. If you pay the bill on 1/7/09, then it is appropriate to record it as paid on that date (and the check should be dated on the day you pay the bill).

[RLM]

Thank you John that is helpful information. I was always of the mindset that you need to reflect the date of the invoice when posting a payment. Your thoughts make my life a lot simpler. I don't really understand the concept of 'accrual' accounting.

[RLM]

As a follow-up to this, what SHOULD I be using with PowerCHURCH? Should I use CASH or ACCRUAL transactions?

[Jeff]

As far as what you should use, you and church board will have to make that decision as what is appropriate for your church. If your church hires a CPA to audit your records yearly then they will almost certainly produce accrual statements for you as part of their report.

The primary difference between cash & accrual is when income or expense is recognized. In cash based accounting you don't recognize the expense until you pay it.

The accounting transaction to record an expense in an accrual system generally looks something like this:

When expense is incurred:
debit expense for amount of expense
credit accounts payable liability for amount of the expense

When check is written:
credit bank for amount of the check
debit accounts payable liability for amount of the check

A major question is will your board understand the reports if the total income & expense doesn't match the change in balance on the check register? We talk to a lot of people and that is probably the biggest misunderstandings about accounting, why difference between income & expense doesn't match the amount of change in the checking account. Under accrual, your differences will be much larger than cash basis.

PowerChurch with the AP & AR modules are cash based. That means they will not post transactions to the general ledger module until things are paid. The payroll module functions on an accrual basis.

Many church run their month to month reports on a cash basis and then create adjusting entries at the end of the year to make the accruals and only produce accrual reports at the end of the year.

[RLM]

Thank you so much for taking the time to explain this to me. This issue has been a major stumbling block for me since I began using PowerCHURCH in February, 2008. Your breakdown of the differences between CASH & ACCRUAL and how PowerCHURCH was designed has been very helpful. I serve a very small (100 weekly attendance) community church. I am the treasurer and there is no one in the wings even as a back-up at this point. Over the years the previous treasurer has used multiple ledger sheets and merely 'tracked' income & expenses which seems consistent with the CASH management accounting. That most likely is the path that I will take as I begin the 2009 fiscal year. THANK YOU!

[karlaj]

Is it ok it the expenses on the "Income & Expense" report doesn't match the expenses on the "Check Register" even if you have no liabilites? At the end of the quarter my liabilites zero out before I close that month and my expenses still don't match, but everything else balances!

[Jeff]

Did any assets accounts increase or decrease during the quarter? If they did that too would explain a difference in the change in the check register versus a change in income & expense.

It is also possible to have a change in income & expense accounts that does not effect cash. In the last 2 weeks there was a question here on the forum where someone wanted to record donations for VBS supplies so they could get a true cost of VBS. In this case you would credit income and debit expense. This would show more expenses than actually went through the checking account and you would then not be able to match the cash outflow from the check register to the expense total in the I&E statement.

Another possible reason is if you recorded a non-cash expense, such as depreciation. Although unlikely given your question, it is another possibilty as to why the amounts would ntot match.

[Jeff]

Another possible reason, if you are getting the total cash outflow from the checks total at the bottom of the report and you voided any items during the period, that will effect that total. For example, say you have a 1,000 check that was voided during the month. The check register would look like this:

Code: Select all

Reference     Date        Description        Deposits    Checks
1234          01/01/2009  Check#1234                    1000.00
1234-VOID     07/01/2009  Void Check# 1234    1000.00

Total                                         1000.00   1000.00

Because of the void, the total check column is 1,000 higher than what actually went through the checking account.

[karlaj]

On my check register report, I export to Excel and delete any voided checks and delete deposits so I only have checks written for that month. I can't figure out why they don't match especially if I don't have any liabilities. My checking account reconciles with the bank.

[JohnDMeyers]

Two other things that may cause this.

Do you have multiple funds that share your checking account?

Do you use sub-accounts on your major checking account?

[karlaj]

I do have 2 funds, 01 general fund and 02 designated funds. I was including both of these. I do not have any sub-accounts under my main checking account.

I have been using Powerchurch for 9 years now and I don't think they have ever matched. I feel like everything is correct, as my bank statement reconciles each month and my trial balance is 0. I just assumed it was because of having liabilities, but my friend who uses Powerchurch didn't have any liabilities when she closed out June and her expenses don't match.

For June, my expenses of all checks written was $21,411. The total expenses on 01 and 02 income and expense report was $19,440. The difference was $1970 and I only had $552 in liabilities. That's a huge difference!

[JohnDMeyers]

If some of those checks were payroll, then you will have to carefully sort through that process.

A payroll deduction will Debit (increase) your checking account and show an increase in liability. Until the liability is paid off, your bank statement won't record the check, but your Credit column on the checking account will. (there will also be an equivalent amount in the Debit column).

Also, until the liability is paid off, your income and expense account won't record the expense.

You can investigate to see if that amount lines up with your difference.

[Donna Wright]

I am brand new to this system. The person training me is working full time and unable to help a lot.
Was wondering if someone could answer this: Why do we have to wait until the end of the month to post the tithes and offererings to the system? Why can it not be done weekly?
Thanks for any help you can give.
Donna

[JohnDMeyers]

You can post the information after entering it.

You close the end-of-month at the end of each month.

It could be that someone create a process, whereby all transactions were left unposted until the end-of-month, so that all the posting and closing was done at the same time. That is not the most common way, but some do prefer to do that.

It's not that you can't post, it that they preferred not to.

The way we proceed is this:

After you enter the information in the Contributions Module, and, after running your reports such as Unposted Contributions, to check your work, you post the information in the Contributions Module. Typically, you will choose the option to make the information available to Fund Accounting.

Immediately, (unless you know you made an error, like you entered the incorrect date or something) you will post the information in Fund Accounting. That will update all of your Income and Expense reports, your Budget report, and your Balance Sheet.

After the end of the month, when you have gotten all the financial data entered for the month, you will close the end-of-month.

We post in Contributions and Fund Accounting on the same day we enter contributions (after checking for errors)

We post in Accounts Payable and Fund Accounting immediately after printing any checks (after checking for errors)