miscellaneous income accounts

[maviszook]

I am not trained as an accountant. I see we use many expense accounts but fewer income accounts. I need to enter a few miscellaneous deposits: a refund check from overpaid phone bill, a check from insurance for a loss, the bank correcting a coding error from the previous month, and an electric company cooperative capital credit refund. Should these all go in with 4000 account numbers, or should some be entered as negative numbers in expense accounts, such as the account payables phone expense? I have an account named "uncategorized income". Is it fine to put them all in that via journal entry? I do not have "miscellaneous income". Should I create a new account number for the insurance payment? I use v.9.

[Matt]

Here's some rules of thumb:

- If the "income" is a refund of a previously paid expense (i.e. your phone bill refund) then you should debit your checking account and credit the expense account.

- A separate income account should be set up for "significant" income types (i.e. your insurance settlement)

- A miscellaneous income account should be set up as a "catch all" for insignificant sources of income (i.e. bank recording a correction for a coding error) that are not meaningful to capture in a separate account.

[maviszook]

Thanks Matt. I also was given the advice to debit and credit the account from which the check was written that got the bank coding error.

I was thinking, maybe I should be crediting my insurance expense account.

[Matt]

Yes, I would agree that if the "bank coding error" correction was to correct for a check that you should debit and credit the original accounts on the check. You didn't specify what the bank coding error was in your original post

I would not credit your insurance expense account for the insurance settlement because this is not for a refund of insurance premiums. You don't state what the settlement was for, but depending on the situation it's possible that you may need to credit an asset account (i.e. settlement was for damage to equipment that reduced it's value)

[Eden Whitehead]

Here's some rules of thumb:

- If the "income" is a refund of a previously paid expense (i.e. your phone bill refund) then you should debit your checking account and credit the expense account.

- A separate income account should be set up for "significant" income types (i.e. your insurance settlement)

- A miscellaneous income account should be set up as a "catch all" for insignificant sources of income (i.e. bank recording a correction for a coding error) that are not meaningful to capture in a separate account.

In a different thread, Jeff posted:

Postby Jeff » Wed Jun 09, 2004 7:40 am

<text deleted> Typically when you have a refund, you would go back against the orignal expense account and reduce the amount of expense rather than show additional income. Because really that is what is happening, you are getting money back because of an overpayment of an expense. I don't know if that money can be traced back to a particular expense or not. If it can't, it wouldn't be the end of the world to show it as income. The only thing that would happen is your total income and total expenses would be overstated slightly.

Given the above, I'm still not sure how to proceed. . . .

The church closed its bulk mail account and received a refund from the Advance Deposit Account for almost $200.00. This money was expensed more than a year ago. As Jeff said, it wouldn't be the end of the world to show it as income.... but I'd rather not if there is another way to handle it. I also don't want to credit the expense account because it will skew the picture for what was actually spent on postage in 2009. Can I simply DB the checking account (1xxx) and CR the equity account (3xxx)? Or is that not a good plan? What would be another solution?

Thanks, as always.
Eden

[NeilZ]

Here's some rules of thumb:

- If the "income" is a refund of a previously paid expense (i.e. your phone bill refund) then you should debit your checking account and credit the expense account.

- A separate income account should be set up for "significant" income types (i.e. your insurance settlement)

- A miscellaneous income account should be set up as a "catch all" for insignificant sources of income (i.e. bank recording a correction for a coding error) that are not meaningful to capture in a separate account.

In a different thread, Jeff posted:

Postby Jeff » Wed Jun 09, 2004 7:40 am

<text deleted> Typically when you have a refund, you would go back against the orignal expense account and reduce the amount of expense rather than show additional income. Because really that is what is happening, you are getting money back because of an overpayment of an expense. I don't know if that money can be traced back to a particular expense or not. If it can't, it wouldn't be the end of the world to show it as income. The only thing that would happen is your total income and total expenses would be overstated slightly.

Given the above, I'm still not sure how to proceed. . . .

The church closed its bulk mail account and received a refund from the Advance Deposit Account for almost $200.00. This money was expensed more than a year ago. As Jeff said, it wouldn't be the end of the world to show it as income.... but I'd rather not if there is another way to handle it. I also don't want to credit the expense account because it will skew the picture for what was actually spent on postage in 2009. Can I simply DB the checking account (1xxx) and CR the equity account (3xxx)? Or is that not a good plan? What would be another solution?

Thanks, as always.
Eden

Since most churches work on a cash basis, the accounts from last year probably have been closed. This refund then could be listed as income in Funds Accounting only using the method you described.

[Jeff]

I think it would be fine to credit the equity account instead of an income or expense account. You typically only do this to correct prior year mistakes.

In this case you mentioned this was a deposit account, strict accounting would say it should have been listed as an asset and not shown as an expense anyway.

[Eden Whitehead]

I think it would be fine to credit the equity account instead of an income or expense account. You typically only do this to correct prior year mistakes.

In this case you mentioned this was a deposit account, strict accounting would say it should have been listed as an asset and not shown as an expense anyway.

Jeff, thank you for the additional insight. I will keep the asset vs. expense consideration in mind for similar activities in the future.

Eden