Prepaid Giving

[Joetta Trimble]

How should prepaid giving be handled in the accounting setup? I know how to take care of this in the contributions module, but there are always questions and much confusion as to how to report the money In the fund accounting setup.

Last year, it was put into a non-budget fund, then transferred to the Budget fund after the first of the year, and it shows on our income and expense report as an interfund transfer.

Some on the finance committee want to put the amount of prepaid giving into asset/liability accounts in the year given, then move it to an income account in our Budget fund at the beginning of the new year. It seems to me that with that configuration, it wouldn't be considered income until the year after it was given. I can't get my head around this! Any suggestions would be appreciated. Our committee meets this afternoon.

Thanks!

[JohnDMeyers]

I suppose you have already had your financial meeting, but I will chime in on this.

You can only show the money coming into the organization once. If you have a transaction that affects both an asset and a liability at the same time, that doesn't count, because it is a wash, so you could move it into income at a later time.

You could receive it as an asset "prepaid contributions" and a liability "owed to contributions" at the same time. Then move it to income by debiting the liability and crediting income.

the actual receipt of the prepaid is to checking, so there is one more move involved:

Receive the prepaid amount
DB checking
CR liabitity "owed to contributions"

then move it out of checking so that it doesn't get used:
CR checking
DB asset "prepaid contribution"
NOTE: the money is still in your checking account unless you physically write a check to savings or somewhere. If you don't move the money out of checking, this transaction won't reconcile with your checking account.

When you want to show it as income:
DB liabitiy "owed to contributions"
CD income "general income"
NOTE: this can be done in contributions with the donor's envelope number

Those are my thoughts.

[Joetta Trimble]

John,

Thank you for the reply. We did have our meeting. One of the committee members is an accountant, and he provided a similar scenario for the prepaid donations, although what you posted is in greater detail and much easier to understand!

Our problem stems from the way the church has traditionally dealt with prepaid giving, and it has never seemed correct to me, but I wasn't sure how to fix it. This provides me with the tools to get it right. Now watch, no one will prepay this year!

Thanks again, and God bless.