Construction Loan Across Funds

[RLM]

We recently secured a Construction Loan from a local bank. Over the last two years all building fund expenses have been tracked through our (02) BUILDING FUND checking account. I am having the loan funds electronically deposited into the (02) BUILDING FUND checking account so that I can track both the new money as well as the expenses that are being paid through that account.

My first transaction was this:
02-1120-000 Building Fund Checking $35,000.00 DB
02-2620-000 Construction LOAN Liability $35,000.00 CR

The issue is with the repayment of the funds because they will be coming out of the (01) GENERAL FUND checking account and applied to the a Building Loan Service expense which was written into our 2011 General Fund budget.

01-1110-000 General Fund Checking CR
01-5910-000 (name withheld) Bank Loan DB

How am I going to reconcile the liability if it resides in a fund other than the one that the repayment of the loan is made from? What should my transactions look like? What could I have done differently?

[JohnDMeyers]

I would suggest making your payments like this:

01-1110-000 General Fund Checking CR
01-2620-000 Construction loan liability DB (principle amt)
01-5910-000 (name withheld) Bank Loan DB (interest amt)

On consolidated reports, your 01-2620-000 and 02-2620-000 will show the correct amount outstanding.

When you are done building the building, transfer the expenses from fund 02 that are capital improvements to the General Fund as an asset (an addition to your current building asset).

There are other ways to tackle this, but this may be the easiest.

[RLM]

I am a little overwhelmed with the TRANSFER transactions. Maybe I have expended all of my energy figuring out how to do what I have done below and am running out of gas.....

This is what I have ready to post:

Show the original cost of the property ($35,000) as an asset by:
02-1630-000 (address of property) DB $35,000.00
02-3050-000 INVESTMENT IN CAPITAL ASSET CR $35,000.00

Make the consolidated expenses for the Capital improvements between 2008-2010 an asset:
02-1560-000 Improvements to (address of property) DB $300,000.00
02-3110-000 Unrestricted Net Assets CR $300,000.00

Zero out all of the 2011 expenses that are Capital Improvements:
02-1560-000 Improvements to (address of property) DB $300,000.00
02-8###-000 Building Materials CR $???.??
02-8###-000 Carpeting/Flooring CR $???.??
etc. enough to equal $300,000.00

NOW, what transfers should I use to move those assets & equity amounts from Fund (02) Building Fund to (01) General Fund where I have already transferred the liability from the money deposited in 02-1120-000 throughout the year which total $133,000.00.

Feeling the pressure..... If I don't get this done for our annual report (due now) our (01) General Fund Fund Balance is going to be pathetically in the RED!

[JohnDMeyers]

I am assuming your 2011 expenses just happen to be $300,000, which is the same as 2008-2010. In other words, you have $600,000 in 02-1560-000.

---------------
Transfer asset to General fund:
CR 02-1630-000 $35,000
DB 02-9630-000 $35,000 (closes to 02-3050-000)

CR 02-1560-000 $600,000
DB 02-9560-000 $600,000 (closes to 02-3110-000)

------------

Receive asset in General fund
DB 01-1630-000 $35,000
CR 01-9630-000 $35,000 (closes to 01-3050-000)

DB 01-1560-000 $600,000
CR 01-9560-000 $600,000 (closes to 01-3110-000)

-----------------

The equity accounts in 02 will "zero-out" when the asset is transferred out.

[RLM]

Thank you John -

Yes (I rounded up) the contruction improvements were basically equal 2008-2010 (prior years) and for 2011.

I will have to validate the equity funds that each closes to. The 02-3050-000 is in question. I will check that out later today when I get back to my system. I am confident that the 02-1560-000 is correct. I may have missed that. This helps tremendously and has saved me from having to make a correcting entry in 2012. It's nice to get it right the first time.