Hey all you creative accountants:
In the thread, " Transfers between Funds (again)"Jeff said: "Just internally transferring money from one fund to another won't usually create a liability, unless one fund will have to repay the other fund at a future date." and "You would usually use transfers when one fund's expense is being paid by another fund."
Our day school (Fund 03) gives a monthly check to the church (Fund 01) as reimbursement toward utilities, insurance, and suchwhat. The church pays those bills and apportions the expenses. At year end, we expect an accounting and reconciliation, such as, Fund 03 owes more, or Fund 01 needs to repay Fund 03.
Also, Fund 03's payroll pays Fund 01's cleaning expense, and this is considered part of that reimbursement.
I had been moving money from 03-1130 (school checking) to 03-1110 (church checking) and using this to pay the expenses (the portions for Fund 03), which are helpful to show and track for the school. Then remainder in 03-1110 showed the current balance of that reimbursement.
But should I be using a liability account? Would that be in Fund 01?lso, Fund 03's payroll pays Fund 01's cleaning expense, and this is considered part of that reimbursement.
I had been moving money from 03-1130 (school checking) to 03-1110 (church checking) and using this to pay the expenses (the portions for Fund 03), which are helpful to show and track for the school. Then remainder in 03-1110 showed the current balance of that reimbursement.
But should I be using a liability account? Would that be in Fund 01?
I have been using transfer accounts then to show the school giving the church the money, but then I think I need to show the church giving the school the money too. This is confusing me! I'm not comfortable moving this money through account 1110 if it does not actually go through the church checking account.
How do I show the school reimbursement balance correctly? It was suggested to me that it would be like an escrow account, which sounds like a liability account.
Help please.
accounting challenge
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Here are some example attempts:
school Fund 03
church Fund 01
school checking 03-1130 credit $1800
church checking 03-1110 debit $1800
transfer into 01 01-9010 credit $100
cleaning service 01-5720 debit $100
or
school checking 03-1130 credit $1900
church checking 03-1110 debit $1800
school payroll 03-7100 debit $100
or
school checking 03-1130 credit $1900
transfer out to 01 03-9010 debit $1900
church checking 01-1110 debit $1800
transfer into "escrow" 01-2400 credit $1900
cleaning service 01-5720 debit $100
But it works well to pay the school expenses from 03-1110.
I think church also needs to transfer $100 to school.
Thank you for your attention.
school Fund 03
church Fund 01
school checking 03-1130 credit $1800
church checking 03-1110 debit $1800
transfer into 01 01-9010 credit $100
cleaning service 01-5720 debit $100
or
school checking 03-1130 credit $1900
church checking 03-1110 debit $1800
school payroll 03-7100 debit $100
or
school checking 03-1130 credit $1900
transfer out to 01 03-9010 debit $1900
church checking 01-1110 debit $1800
transfer into "escrow" 01-2400 credit $1900
cleaning service 01-5720 debit $100
But it works well to pay the school expenses from 03-1110.
I think church also needs to transfer $100 to school.
Thank you for your attention.
Sorry about the double talk in the first question.
I created a separate equity account, school reimbursement net, that the expenses and transfers close to, but not having an income account, the balance does not include the asset balance. How about if I transfer in equity accounts?
school net 03-3110 debit $1900
school reimbursement net 03-3130 credit $1900
I created a separate equity account, school reimbursement net, that the expenses and transfers close to, but not having an income account, the balance does not include the asset balance. How about if I transfer in equity accounts?
school net 03-3110 debit $1900
school reimbursement net 03-3130 credit $1900
I think I finallly got it. two separate episodes.
school checking 03-1130 credit $1800
church checking 03-1110 debit $1800
church cleaning expense (paid by school payroll) 01-5720 debit $100
church owes school 01-2420 credit $100
Then expenses due to school (fund 03) can be paid either from 03-1110 or by reducing the liability.
school checking 03-1130 credit $1800
church checking 03-1110 debit $1800
church cleaning expense (paid by school payroll) 01-5720 debit $100
church owes school 01-2420 credit $100
Then expenses due to school (fund 03) can be paid either from 03-1110 or by reducing the liability.
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Matt
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Let's go back to your first post. You said the day school (Fund 03) gives a monthly check to the church (Fund 01) to reimburse the church for expenses attributable to the school fund, but paid out of the church fund. My first question is how is the monthly check amount determined? Second, how does the church apportion the expenses between the school and church? And when these expenses are apportioned what kind of accounting entry is input into PC+? Third, when the bills are paid does the church know at that point how much of the bill belongs to the church and how much belongs to the school?
1. The monthly check was a rough estimate based on previous year's expenses. The purpose was to help the school director plan the school budget without worrying about monthly fluctuations.
2. The expenses are apportioned variously. School occupies one of three buildings on the property, so we ascribe one third of the property insurance to them. They pay the majority of the utility bill which is assigned to that building. They pay for their phone line and internet, and the church pays for its phone line. These things come on one bill. They pay half of the copy machine service contract. And so forth. Some bills are divided by percentages and some by dollars, as each seems most logical. The formulas are written down and agreed to.
In Accounts Payable, for example one check for $750 to utilities:
checking 01-1110 credit 250.00
utilities 01-5630 debit 250.00
checking 03-1110 credit 500.00
utilities 03-5630 debit 500.00
3. So each of these shared expenses are divided according to some formula.
We can see clearly the consolidated or the separate utility expenses. The account 03-1110 I would call "receivable" for the school could nicely show whether they are contributing enough to cover their share of the expenses.
2. The expenses are apportioned variously. School occupies one of three buildings on the property, so we ascribe one third of the property insurance to them. They pay the majority of the utility bill which is assigned to that building. They pay for their phone line and internet, and the church pays for its phone line. These things come on one bill. They pay half of the copy machine service contract. And so forth. Some bills are divided by percentages and some by dollars, as each seems most logical. The formulas are written down and agreed to.
In Accounts Payable, for example one check for $750 to utilities:
checking 01-1110 credit 250.00
utilities 01-5630 debit 250.00
checking 03-1110 credit 500.00
utilities 03-5630 debit 500.00
3. So each of these shared expenses are divided according to some formula.
We can see clearly the consolidated or the separate utility expenses. The account 03-1110 I would call "receivable" for the school could nicely show whether they are contributing enough to cover their share of the expenses.
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Matt
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- Joined: Fri Dec 05, 2003 4:04 pm
- Location: Jacksonville, AL
Thank you for explaining how you are doing this. Based on your explanation I don't think you need to use liability or transfer accounts at all. The reason is that you have two checking accounts--one for the school and one for the church. When paying the bills out of the church checking account split them between the church and school funds just like you did for the $750.00 example. Then, when the school sends the church the monthly check just input an entry like you have been to debit 03-1110 and credit 03-1130. The balance in 03-1110 will tell you how much the reimbursements are over or under actual expenses.
To record the payroll for the cleaning expense properly you will need to add the 1130 checking account to fund 01, i.e. 01-1130. Then post the payroll as a debit to 01-5720 and credit 01-1130. Periodically, the church will need to write a check to reimburse the school checking account for the cleaning expense. When this is done debit 01-1130 and credit 01-1110. The balance in 01-1130 will tell how much the reimbursements are over or under actual expenses.
To record the payroll for the cleaning expense properly you will need to add the 1130 checking account to fund 01, i.e. 01-1130. Then post the payroll as a debit to 01-5720 and credit 01-1130. Periodically, the church will need to write a check to reimburse the school checking account for the cleaning expense. When this is done debit 01-1130 and credit 01-1110. The balance in 01-1130 will tell how much the reimbursements are over or under actual expenses.
Thank you, Matt,
I was thinking along these lines today also (adding 1130 to fund 01). It would be nice though, if the summary between church and school could be in one account, hopefully the 03-1110. Yes, it would be simpler if the church wrote checks to the school for the cleaning and the school wrote checks to the church for other expenses, but isn't there a way to sort it out so only one entity needs to be writing checks to the other?
My question also remains: Is it okay to do one side of a transfer without the other? It does not seem right somehow. Do other accounting systems than Power Church use transfer accounts?
I was thinking along these lines today also (adding 1130 to fund 01). It would be nice though, if the summary between church and school could be in one account, hopefully the 03-1110. Yes, it would be simpler if the church wrote checks to the school for the cleaning and the school wrote checks to the church for other expenses, but isn't there a way to sort it out so only one entity needs to be writing checks to the other?
My question also remains: Is it okay to do one side of a transfer without the other? It does not seem right somehow. Do other accounting systems than Power Church use transfer accounts?
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Matt
- Authorized Teaching Consultant
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- Joined: Fri Dec 05, 2003 4:04 pm
- Location: Jacksonville, AL
Have you considered combining the two checking accounts and just having one account? This would eliminate the need to write checks from one account to reimburse the other. If funds needed to be transferred from one fund to the other this could be accomplished using accounting entries without having to write a check if only one checking account was being used.
I do not believe it is proper accounting to do a transfer between two funds and only show the transfer in one of the funds. This disguises the source (or transfer) of the money in the fund the transfer account is not posted to.
I do not believe it is proper accounting to do a transfer between two funds and only show the transfer in one of the funds. This disguises the source (or transfer) of the money in the fund the transfer account is not posted to.
Ah, so the answer is, both entities do need to write checks to each other.
No, it is not comfortable to have only one checking account. The school is relatively separate from the church.
I've been going round and round. I always find I want a one-sided entry.
So, what did you think of the idea of working directly with an equity account?
No, it is not comfortable to have only one checking account. The school is relatively separate from the church.
I've been going round and round. I always find I want a one-sided entry.
So, what did you think of the idea of working directly with an equity account?
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Matt
- Authorized Teaching Consultant
- Posts: 733
- Joined: Fri Dec 05, 2003 4:04 pm
- Location: Jacksonville, AL
If you set up account 01-1130 and post the payroll for the cleaning expense as I indicated earlier there is no need to use the transfer accounts at all. The transfer will be accomplished when you write the check from the church checking account to reimburse the school checking account and you post it as I indicated.
The reason you are going around and around on the one-sided transfer entry is given the scenario you have painted there is no need to do the entry at all. So you are trying to figure out something that shouldn't be done in the first place.
Normally you should not post entries directly to the equity accounts. This generally is not proper accounting.
The reason you are going around and around on the one-sided transfer entry is given the scenario you have painted there is no need to do the entry at all. So you are trying to figure out something that shouldn't be done in the first place.
Normally you should not post entries directly to the equity accounts. This generally is not proper accounting.
Thank you, I don't feel comfortable messing with equity accounts.
I'm finding if I credit the payroll, then it is correct as far as the school is concerned, but not correct in the school checking reconciliation. Oh! you are saying debit 01-1130 and credit 01-1110. Thank you, I'll try this now.
I apologize for making so much trouble.
I feel extra sorry for anyone trying to audit me carefully!
I'll let you know how this works.
I'm finding if I credit the payroll, then it is correct as far as the school is concerned, but not correct in the school checking reconciliation. Oh! you are saying debit 01-1130 and credit 01-1110. Thank you, I'll try this now.
I apologize for making so much trouble.
I feel extra sorry for anyone trying to audit me carefully!
I'll let you know how this works.
Mmm, something is still not right. The school checking account is not reconciling. The trial balances in fund 03 look correct.
I found one library book with one paragraph which says that amounts borrowed or spent by one fund using cash from a different fund should be set up in the former as a loan payable to the latter and in the latter as a loan receivable from the former. How would you do this?
I found one library book with one paragraph which says that amounts borrowed or spent by one fund using cash from a different fund should be set up in the former as a loan payable to the latter and in the latter as a loan receivable from the former. How would you do this?
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Matt
- Authorized Teaching Consultant
- Posts: 733
- Joined: Fri Dec 05, 2003 4:04 pm
- Location: Jacksonville, AL
Without actually seeing your bank reconciliation and the postings you have made I can't advise on why the school checking account is not reconciling. I can tell you that if the entries are posted as indicated in my earlier posts both the school and church checking accounts should reconcile to the bank statement ok.
Regarding what the library book says--I do not feel in the situation you describe that payables and receivables should be recorded. The reason is that the problems you are describing are due to the fact that you have two checking accounts, want payments from each checking account to correlate to it's corresponding fund, but are making payments from one account that really should be made from the other account. I do not feel that needing to reimburse one checking account for payments made out of another checking account meets the definition of a liability or a receivable.
Regarding what the library book says--I do not feel in the situation you describe that payables and receivables should be recorded. The reason is that the problems you are describing are due to the fact that you have two checking accounts, want payments from each checking account to correlate to it's corresponding fund, but are making payments from one account that really should be made from the other account. I do not feel that needing to reimburse one checking account for payments made out of another checking account meets the definition of a liability or a receivable.