Liability Accounts

tborgal · Post by **tborgal** » Fri Aug 13, 2004 11:26 am

We have a couple of Funds that money is being held in for specific purposes that I did not want to be reported with the Fund Balances. I therefor moved that money into a Liability line item by transfering it from the Fund Balance Account in each fund. When I ran a Balance Sheet report the Liabilities did not appear in the individual funds, but they do appear in the consolidated report. Is this because we only have Assets in the 01 (General Fund) and not in the 02 and 08 funds where this change was made? Or have I done something else wrong? The Fund Balance report shows the correct balance as does the Balance Sheet. The transfered money is not in the total.

Randy B · Post by **Randy B** » Fri Aug 13, 2004 1:12 pm

I am not sure the answer to your question but I think from accouting standpoint there is a better way. You are holding cash in your 01 and created liabilities in the other funds. I would recommend you undo your establishment of 02 and 08 funds. Then set up sub accounts of your cash and transfer the cash held for the specific purpose to the 02 and 08 funds. The balance sheet will balance with cash equaling the fund balance and your church will be sure that is does not spend cash other than the purpose for which it was collected.

If you want to hold cash in your 01 fund, then the 01 fund should have a liability payable to the 02 fund and the 02 fund would have a receivable from the 01 fund.

tborgal · Post by **tborgal** » Wed Aug 18, 2004 9:13 am

Randy,

I think you answered my question in your reply to NancySager about TRUST money which realy better descibes what we are doing. We to only have one bank account and I was concerned about giving the impression that the money being held in these 'TRUSTS' would be seen as cash available and be used for general church operations. Is it best to create these accounts as seperate funds, or can they be esstablished within the fund they are currently being held in?

Randy B · Post by **Randy B** » Wed Aug 18, 2004 1:11 pm

The post before my response to Nancy Sager was from JeffKoke. He handled it the way I would have by establishing a separate fund. I offered another way that could work for her. If this something that you regularly do then establish a fund meaning you collect, hold and then disburse from that fund. You can have one bank account with the cash sub account ability and with the amount of cash on your balance sheet for that fund listed so everyone know that cash is not for operating purposes on your consolidated balance sheet. Jeff used missions as an example and that is how I handled missions. Cash came in for missions was put into the missions fund. Cash equaled the fund balance showing everyone this was designated or reserved for a particular purpose. You could establish a revenue account to in order to show what came in and an expense account when disbursed.

As an example, my church supports missions and a young lady felt the call for an missions trip. The church collected money for it to be disbursed for that purpose. I run it through the missions fund with all other missions. The revenue account told me what had been collected and that was the cash held in missions for that one purpose until I disbursed it which was captured in an expense account. I think you could apply that example to your situation. I then reconciled the missions fund cash each month by comparing it to cash held for purpose 1, 2, and 3. If the two equaled, then I had handled it correctly.