Is this Right?

[Pastor Ware]

I am using V10.4 on Vista Home Premiumn. I have been learning over the previous year and have appreciated all of the information posted in the various forums.

My question is 2 part...

1st;
We are required by our "mother org." to submit a certain percentage of the tithes coming into our ministry to them for operational expenses. I have set up our contributions for tithes to automatically transfer the correct percenatage to a "pass-thru acct" for this purpose, Then periodically we issue a check from this account. Initially when I set up the beginning balances, I recorded information after the fact that left me at the end of the year with a balance of -$7550.00 showing. To correct this problem I made a general journal entry crediting the pass-thru acct. and debiting the "unrestricted net assets" acct. bringing our balances for the "pass-thru" into agreement with our records. Is this the correct way of handling this?

2nd;
Is there a way to properly document this (and Other) "pass-thru" items for our financial reports and records? I considered possibly by-passing these accts altogether and reclassifying them as strictly expenses.

In His Service; DLW

[JohnDMeyers]

It sounds like you are trying to put money into an account and take money out of the same account so that no numbers appear at the end.

Regardless,

Here are some account numbers

01-1150-000 pass thru checking account
01-4150-000 pass thru income
01-5150-000 pass thru expense

Your contribution fund should debit 01-1150 and credit 01-4150

When you cut a check, it should debit 01-5150 and credit 01-1150

The net unrestricted funds will work out ok automatically in this case, as the net (income minus expense) will be zero.

[Pastor Ware]

I should have mentioned that the pass-thru account was set up according to the default settings in PowerChurch as a liability acct. The amount of $-7550 was the result of checks that were posted against the liability account, but the income to that account was not credited at beginning balances. It is true that the account should not have an outstanding balance when all transactions are fulfilled. Do you reccommend doing away with the liability account altogether and setting up the expense accts instead? Thanks for your response!

[JohnDMeyers]

So checks against the account debit your liability account and credit net unrestricted assets.

Deposits do the opposite to the same two accounts.

That works. The only problem is that you will end up with no report of activity when all is said and done.

It depends on what you are trying to accomplish. By directly changing the net unrestricted assets it is hard to look back at a previous year and see what activity took place.

A negative balance in the liability account says that someone "owes" this account some money. A positive liability says that this account "owes" some money to someone.

You showed that you wrote checks against an empty account. Someone "owes" this account some money to cover the checks. It's like a "due to my account"

The way you have it set up, when money comes in you should debit income and credit the liability. That says, "someone owes this account less money, and I received negative income against it". Kind of weird.

A better way is to move the liability to a negative asset. (credit an asset and debit the liability for the beginning amount). That way, when money comes in, you will credit income and debit the negative asset, which makes more sense.

You are saying initially, I created money which I didn't have, and received negative equity as a result. When money comes in, it is income (which is correct), and my negative asset becomes less negative.