Budgeting: Carry over cash from last year?

[Ronz]

I think I've asked this before. Maybe some answers have been discovered, so I'll ask again....

We have about $3000 of cash left over in 2007 that we want to use in 2008 to pay general expenses.

We have budget income, budgeted expenses, and even budgeted liabilities. In order to establish a balanced budget, we need to consider that $3000 of cash in our budget for 2008.

I'm don't know of the proper way to budget that. I now do it on a spreadsheet and add the cash it to the income. I also add liabilities (loan principle payments) to expenses. But if you look at Power Church's budgeted income and expenses, it it out of balance by $3000 + the amount of loan principle.

It sure would be nice if Power Church could include cash like that and liabilities payments in a budget report and show the difference so we can tell if our budget is balances.

Maybe there is an official accounting method for budgeting cash and loan principle payments. I just don't know what it is.

Thanks

Ron Zastovnik
Memorial UMC, Clovis CA

[Matt]

The reason you are running into these differences is because you are trying to make net cash flow and the difference between income and expense to be the same amount. Net cash flow and the difference between income and expense are not the same thing.

If you had $3,000 of cash left over from 2007 that you want to use in 2008 then your 2008 budget should show $3,000 more in expenses than income. To eliminate the difference being caused by the loan principle payments you need to debit the expense account for the full amount of the loan payment, not just the interest part. Then, you will need to input a second accounting entry that debits the liability account and credits the fund balance account for the principle portion of the payment.