Transfers/Reassigning unrestricted money to restricted

[liberty7]

I will be upgrading from Power Church v. 9 to v. 11.5. I want to set up the accounting a little differently than how it is presently structured. I have described below how some transfers would be handled. I would appreciate it if someone could look it over and make sure that I am correct. Thanks!

-One accounting fund will be set up in Power Church

-The church has two checking accounts:
General Checking Account (01-1110-000)
Missions Checking Account (01-1140-000)

-A ‘missions’ donor restriction will be set up. The accounts would be as follows:
equity acct.: 01-3201-000
income acct.: 01-4401-000
release acct.: 01-4801-000

-There will be a contribution fund set up for offerings designated for missions. This contribution fund will debit the General Checking Account (01-1110-000) and credit the Mission Income Account (01-4401-000).

-Once the total contributions for a specific date are deposited into the General Checking Account, the missions portion would be transferred to the Missions Checking Account. If the missions portion is $50.00, the following entry would be recorded in Power Church:
CR 01-1110-000 $50.00 (General Checking Acct.)
DB 01-1140-000 $50.00 (Missions Checking Acct.)

-Every month, the church allocates $200.00 from its unrestricted money to be transferred into the Missions Checking Account, so in essence, the church is restricting that money. The following would be entered to record this transfer:
CR 01-1110-000 $200.00 (General Checking Acct.)
DB 01-1140-000 $200.00 (Missions Checking Acct.)
CR 01-3201-000 $200.00 (Missions Temporarily Restricted Net Assets)
DB 01-3110-000 $200.00 (Unrestricted Net Assets)

[JohnDMeyers]

You are correct all the way down to the last lines. Very impressive, by the way.

To be sure, I want to ask if your 01-4401-000 and 01-4801-000 closes-to 01-3201-000. If so, grand.

Do not directly transact the equity accounts. Do it to the income accounts, and the "closes-to" will take care of the equity. Here's my correction for you:

CR 01-1110-000 $200.00 (General Checking Acct.)
DB 01-1140-000 $200.00 (Missions Checking Acct.)
CR 01-4401-000 $200.00 (Missions Temporarily Restricted income)
DB 01-4010-000 $200.00 (whatever your general tithes income account is)

After you make this transaction, run a Balance Sheet report and you can verify that your equity accounts were updated automatically.

[liberty7]

Thank you very much for your reply! I do not have an accounting background, so I don’t know how to “think” like an accountant; I just try to figure out what is logical, so I appreciate the input!

I haven’t actually set up the accounts yet, since I was just trying to figure out if what I was thinking would work, but when I do, I will make sure that 01-4401-000 and 01-4801-000 closes-to 01-3201-000. Thanks!

One question I have with using the income accounts to transfer the money. When the income/expense report or budget report are run, I am thinking that the tithes and offerings line item would be reduced by the amount that was transferred to missions. If this is the case, we would not have an accurate reporting of what was received.

I am just brainstorming, but could I create a second temporarily restricted income account under the group ‘OFFERINGS’ called ‘Tithes & Offerings/Missions’? My chart of accounts would then look like this:

4100-000 OFFERINGS Income Group
4110-000 Tithes & Offerings Income Detail
4115-000 Tithes & Offerings/Missions Income Detail

I think if I did this, and put a budget amount on account # 4115-000, it should give a total on the reports that would accurately display what was received for Tithes & Offerings.

When I set up the ‘4115-000 Tithes & Offerings/Missions’ donor restriction I would specify that the equity account would be 01-3201-000 and the release account would be 01-4801-000 which are the same accounts used by account # 01-4401-000 (the other missions donor restriction income account).

I could then follow your example, but use the 01-4115-000 income account to record the transfer as follows:

CR 01-1110-000 $200.00 (General Checking Acct.)
DB 01-1140-000 $200.00 (Missions Checking Acct.)
CR 01-41151-000 $200.00 (Tithes & Offerings/Missions income account)
DB 01-4110-000 $200.00 (Tithes & Offerings income account)

Does this make sense? Let me know what you think! Thanks!

[JohnDMeyers]

I see what you are trying to do, and this "may" work. My disclosure is that I, too, am not an accountant, just a long-time user of PowerChurch.

Here is one issue. Normally, the Temporarily Restricted Income has its own section on the Income and Expense Statement that is separate from the Unrestricted Income. Your GROUP/detail includes both an unrestricted account and a restricted account. I'm not sure what the implications of that will be. It's just not "normal", as far as I know. One of my goals is to keep our books in something close to GAAP, so we can be annually audited.

Now, what we do is take a "missions tithe" out of our general tithes and offerings in Contributions. Fund Accounting never sees 100% of the general tithes in one account. It's broken up into 90% in General Tithes and 10% in Fund 02 in Missions tithes.

You may just have to get used to seeing an amount in two places.

You can always run a report in Contributions to see the 100% number. That's what we do. (But, you can't budget off of Contributions)

[liberty7]

I sure appreciate you taking the time to give your insights. Your input and suggestions have me reconsidering my decision to create only one fund when I install v.11.5. In v.9.5, that I am presently using, I have a General Fund and a Missions Fund and, thanks to your feedback on my questions, I am thinking it would be wise to keep the Missions Fund as a separate fund.

You showed me the correct way to record the missions transfer when dealing with only one fund. It made me to wonder if my present entries, (dealing with two funds) are correct. Here is how I have been entering them:

CR 01-1110-000 $200.00 General Checking
DB 01-9040-000 $200.00 Transfer to Missions Fund
CR 04-9510-000 $200.00 Transfer from General Fund
DB 04-1140-000 $200.00 Missions Checking

In the above entry, I did not include any income accounts. Is that okay? I am not trying to reassign the transferred money from ‘unrestricted’ to ‘temporarily restricted’ like I was trying to do if I had only one fund. I figured that putting the money in the Missions Fund essentially restricts it for missions and it did not need to be categorized as ‘temporarily restricted’. Is this correct thinking? [If there would be a specific missions project that we were raising money for, I would definitely assign it as ‘temporarily restricted’, but in my mind the money that I am transferring is basically ‘unrestricted missions money’.]

I have another question about reflecting the missions transfer (described above) in the budget report. This is what I am doing to make this happen: I budget a ‘minus $200.00’ for each month on acct. # 01-9040-000 (Transfer to Missions Fund). Then when I run the Budget Report I also check ‘Transfers’. The dollar amounts show up as a negative (in parenthesis) under both the ‘actual’ and ‘budget’ columns. Am I doing this correctly?

Wow, your brain is getting a workout answering all my questions! I really appreciate all your help!

-Judy (liberty7)

[JohnDMeyers]

The way you are transferring money without transacting an income account will work. It will show 100% of your income as "General tithes" instead of showing any income in the missions fund. This will make your income/expenses in your missions fund negative, because there will be no income to offset your expenses. It will also show a "surplus" in income/expenses in the General Fund, because the $200 of income will be expended in another fund.

It would not be wrong to do this (and there may be some benefits):
CR 01-1110-000 $200.00 General Checking
DB 01-4010-000 $200.00 general income
CR 04-4040-000 $200.00 missions income
DB 04-1140-000 $200.00 missions checking

You don't have to restrict the missions money, since it is usually an internal choice to use money for missions, not a donor request. We have a restricted section in our missions fund, in case someone does put a restriction on their gift.

If you use your transfer accounts, you are correct to budget a negative number. This is another reason to use the income accounts as I have shown above. i.e., you can budget a positive number in the missions income account (or budget $200 per month less in your General Income)

One more thing. As long as you are using two separate Funds, you can use the same checking account.
CR 01-1110-000 $200.00 General Checking
DB 01-4010-000 $200.00 general income
CR 04-4040-000 $200.00 missions income
DB 04-1110-000 $200.00 missions checking <---same checking as general fund

This way, you are only making a move on your PowerChurch books, and you don't have to cut a check from General Fund and deposit it in Missions Fund.

If you want to keep a separate missions bank account, that is ok, too. You will have to physically move money from one account to another, either by a "real" check or by a bank transfer at your bank.

[NeilZ]

John ...

Perhaps if they want to use a second Accounting Fund ... it may be easier to do a fund to fund transfer .. then they can definitely differentiate the money in a single checking account.

That's what works here ...

[liberty7]

John-

It is more convenient in our situation to have a separate Missions checking account, so I just transfer the money on-line from one checking account to the other and it works well.

One thing I didn’t realize is that you can transfer money from one fund to another without using the 9000 transfer account #’s. From your example I see if you have another account to debit & credit (such as the income account) you can use that instead. Thanks for showing me that.

Thank you again for all your help!

-Judy (liberty7)