Expense accounts closing to???

[RGWalk]

My predecessor set up Powerchurch just prior to my taking over this position and it seems like he has every Expense account closing to 01-3110-000, which is the unrestricted net assets account. We ran a "Balance Sheet" report the other day, and realized that so many numbers are not making sense. It appears that everything that has ever been put into any category remains there, even though I have paid bills, etc. Am I correct in assuming that these Expense accounts should be answering to something more "exact"...i.e. if a contribution comes in for the Women's Retreat-a temporarily restricted account, 4257-120,-when I pay for the retreat facility using the Women's Ministry expense account, 6035-000, that should answer to the Women's Ministry equity acct 3257-120, right?

[JohnDMeyers]

Generally, when an income account closes to some restricted equity account, it is undone by making a negative income entry, called a release account.

For example:

Money comes in:
DB 01-1110-000 checking $400.00
CR 01-4270-120 restricted income for women min $400.00 (closes to 01-3120-000 restricted equity)

To release the restriction:
DB 01-4820-000 specific restriction release for women min $400.00 (closes to 01-3120-000)
CR 01-4999-000 general release (closes to 01-3110-000)

If you have various equity accounts that have long since been released from their restrictions, you could make some direct entries to correct this:
DB 01-3120-000 old restriction equity $520.00
CR 01-3110-000 unrestricted equity $520.00

I wouldn't mess with expense accounts to even things out. That would introduce another layer of complexity that may have to unraveled later.

[Zaina]

Using release accounts is technically the better way to handle the spending of restricted money. To add to what John has stated, the typical transaction for spending would be:

CR 01-1110 $400
DB 01-4820 $400 (closes to 01-3120)
CR 01-4999 $400 (closes to 01-3110)
CR 01- expense $400 (closes to 01-3110)

This shows that you spent money, it reduces the restriction, moves that restricted money into unrestricted and then spends it out of unrestricted money. The expense account would show what the money was spent for. When you are using release accounts, all expense should close to unrestricted, because you are supposed release money from restrictions before you spend it.

[RGWalk]

Using release accounts is technically the better way to handle the spending of restricted money. To add to what John has stated, the typical transaction for spending would be:

CR 01-1110 $400
DB 01-4820 $400 (closes to 01-3120)
CR 01-4999 $400 (closes to 01-3110)
CR 01- expense $400 (closes to 01-3110)

This shows that you spent money, it reduces the restriction, moves that restricted money into unrestricted and then spends it out of unrestricted money. The expense account would show what the money was spent for. When you are using release accounts, all expense should close to unrestricted, because you are supposed release money from restrictions before you spend it.

So, then this is all one transaction? With three credits and one debit, will I not get the message that the transaction cannot balance?

And, @ John,

Generally, when an income account closes to some restricted equity account, it is undone by making a negative income entry, called a release account.

For example:

Money comes in:
DB 01-1110-000 checking $400.00
CR 01-4270-120 restricted income for women min $400.00 (closes to 01-3120-000 restricted equity)

To release the restriction:
DB 01-4820-000 specific restriction release for women min $400.00 (closes to 01-3120-000)
CR 01-4999-000 general release (closes to 01-3110-000)

If you have various equity accounts that have long since been released from their restrictions, you could make some direct entries to correct this:
DB 01-3120-000 old restriction equity $520.00
CR 01-3110-000 unrestricted equity $520.00

I wouldn't mess with expense accounts to even things out. That would introduce another layer of complexity that may have to unraveled later.

Am I not suppose to make payments out of expense accounts? I do not understand how that would introduce another layer of complexity.

[Zorak]

CR 01-1110 $400
DB 01-4820 $400 (closes to 01-3120)
CR 01-4999 $400 (closes to 01-3110)
DB 01- expense $400 (closes to 01-3110)

Fixed it for you. That last line should be a debit.

[RGWalk]

Thanks, Zorak.

[Zaina]

Sorry MY mistake. Yes the last line should be a debit to the expense. Going back for more coffee now!

[JohnDMeyers]

Am I not suppose to make payments out of expense accounts? I do not understand how that would introduce another layer of complexity.

I understood your original question asking whether 6035-000 "answers to" 3257-120, and it does not. It "answers to" or "closes to" 3110-000.

So, my comment was not to make any adjustments to 6035-000 because it will not solve the issue with 3257-120.