Transfers between funds

[Heidilr1]

We keep our money in 3 separate checking accounts (General, Missions & Restricted). To make transfers simpler in PC, PC Support told me to set up the general checking account in all 3 funds (01-1110, 02-1110, 03-1110). When a contribution comes in for the restricted fund, debit 03-1110. Since we deposit all money into 01-1110, I need to show the bank transfer. They say to just debit 01-1110 and credit 03-1110 to show that. However, then my debits & credits in each fund don't match (and I get the nice little warning in PC). Am I missing something? I don't want them to not match do I? If they need to match, then how do I make this entry work.

Still frustrated on these transfers...

[NeilZ]

We keep our money in 3 separate checking accounts (General, Missions & Restricted). To make transfers simpler in PC, PC Support told me to set up the general checking account in all 3 funds (01-1110, 02-1110, 03-1110). When a contribution comes in for the restricted fund, debit 03-1110. Since we deposit all money into 01-1110, I need to show the bank transfer. They say to just debit 01-1110 and credit 03-1110 to show that. However, then my debits & credits in each fund don't match (and I get the nice little warning in PC). Am I missing something? I don't want them to not match do I? If they need to match, then how do I make this entry work.

Still frustrated on these transfers...

You need to use transfer accounts.

In this transactions, I'm moving from fund 01 to fund 02

01-1110 Checking CR 100.00
01-9110 Trans to DB 100.00
02-1110 Checking DB 100.00
02-9210 Trans Frm CR 100.00

This will reflect the transfer properly.

[Heidilr1]

That's what I thought, but then Support told me differently.

So in my contribution funds, do I debit 01 or 03? Also, do I credit the income to an 01 or 03 account, and do I have to make transfers to move the income (or expense if I'm paying something from the GF, moving money from restricted...)?

[NeilZ]

That's what I thought, but then Support told me differently.

So in my contribution funds, do I debit 01 or 03? Also, do I credit the income to an 01 or 03 account, and do I have to make transfers to move the income (or expense if I'm paying something from the GF, moving money from restricted...)?

This is one of the reasons that while we have three accounting funds, we use only 1 checking account, and allow Powerchurch to take care of the restrictions.

That said. I would think that since you deposit all income into the 01 checking, I would also track the income under 01.

For the Missions fund, I would think that you would write checks directly from the missions checking, so these expenses I'd track there. However, since you would have to move money from restricted checking, back to the 01 checking, I'd track all expenses there.

The problem then becomes, how would you be able to track expenses you're releasing funds from restricted to pay for ??

[Jeff]

Here is an example of how to make this work.

Contributions come in for the following amounts

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General        5,000
Missions         300
Restricted       750
Total deposit: 6,050

The accounting transaction to record the deposit would look like:

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Account              Debit   Credit    
01-1110-000 (asset)  5,000
01-5110-000 (Income)         5,000
02-1110-000 (asset)    300
02-6050-000 (Income)           300
03-1110-000 (asset)    750
03-7080-000 (Income)           750

The 1110 account is in all three funds, until you transfer the money to the other accounts, the 02-1110, and 03-1110 accounts will have a balance. The reconciliation process will combine this to one amount because they were all entered in the same transaction to the ??-1110 account.

When you move money from one bank account to another you don't have to transfer money because the amounts are already in the correct funds. The entries would look like this:

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Account              Debit   Credit    
02-1110-000                    300
02-1120-000            200
Move money to Missions Checking

Account              Debit   Credit    
03-1110-000                    750
03-1130-000            750
Move money restricted checking

Typically you would only need to use transfer accounts when one fund is giving money to another fund. For example the general fund is giving money to the missions fund for a special project.

[NeilZ]

Aha ... so, basically the 1110 account is the single checking account all the funds are deposited in and is listed in all three Accounting Funds.

Then the 02-1120 is the separate checking account for missions, and the 03-1130 is the one for restrictions. Neither one of these appear in the 01 fund.

Very nice.

[Heidilr1]

OK, one more question:

15% of our general fund giving on a Sunday AM goes to missions. Since all of the funds are deposited in the GF, I make the bank transfer of 15% each week to the MF. I follow now how to make this asset transfer (b/w checking accounts). What about the expense side? It is an expense of the GF - so I'm making a debit to the missions expense in the general fund - what is the offsetting credit?

[Jeff]

This one is a little harder. Do you budget the 15% out of the general fund as an expense? What amount do you want to show as general fund income on your income and expense statement?

The easiest way is to create another contribution fund that pulls 15% from general fund at posting time and moves it to missions. This contribution fund would credit an income account in Fund 02 (missions) and the 02 bank account. Then you would just move the money like the missions designated contributions. Doing it this way would show the amounts as 02 income right away and the 15% will not be shown in the general fund. Depending on the reporting that you want, this might or might not be what you want.

If you want to show the money coming into the general fund as budget and a budgeted amount coming out of the general fund, this is a little harder to do, post back to this thread and I can cover different scenarios.

[Heidilr1]

We do want to show it going into the GF and as a missions expense of the GF.

[Heidilr1]

Would this work?:

01-7000-022 (Missions Expense in GF)
01-1110-000 (GF Bank Account)

02-1360-000 (Mission Bank Account)
02-4010-102 (General Missions Income in MF)

[Jeff]

This is a little harder and I will try to explain. If you expense the money from the general fund and credit income in the missions fund you will be overstating your total income and expenses. For example, a $100 is given to the general fund, if you expense the amount from the general fund and treat it as missions income, your income and expense statements would look like this:

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GENERAL FUND

INCOME
   Tithes & Offerings            100
                                ----
TOTAL INCOME                     100

EXPENSES
   General Missions Expense       15
                                ----
TOTAL EXPENSES                    15

                                ----
NET INCOME                        85
                                ====

Code: Select all

MISSIONS FUND

INCOME
   General Missions Income        15
                                ----
TOTAL INCOME                      15

EXPENSES
                                ----
TOTAL EXPENSES                     0

                                ----
NET INCOME                        15
                                ====

The problem is when you run a consolidated income and expense statement it looks like this:

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COMBINED INCOME & EXPENSE
INCOME
   Tithes & Offerings            100
   General Missions Income        15
                                ----
TOTAL INCOME                     115  ***

EXPENSES
   General Missions Expense       15
                                ----
TOTAL EXPENSES                    15 ***

                                ----
NET INCOME                       100
                                ====

*** Overstated by the 15 dollars transferred from General to missions.

The accountant would say that you income and expenses are overstated by the amount transferred. Some people are okay with this because the net income number is not changed or they do not run consolidated income and expense statements.

We have many clients that work this way, you just need to understand that technically income and expense totals are overstated by the amounts that are being transferred between funds. There is another way to accomplish this and I will show this in the next post.

[Jeff]

The other way to do this is to use transfer accounts. You typically use transfer accounts when you are moving money between funds and the money is not going to repaid to the other fund. Transfer accounts are in the 9000 - 9999 range in your chart of accounts, they can be budgeted just like income and expense accounts. We are going to add 2 transfer accounts to the chart of accounts:

9020 Transfer to Missions
9510 Transfer from General

To move the money from one fund to another:

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                                 Debit   Credit
01-1110-000 General Checking                 15
02-1110-000 Missions Checking       15
01-9020-000 Transfer to Missions    15
02-9510-000 Transfer from General            15

The income and expense statements now look like this:

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GENERAL FUND

INCOME
   Tithes & Offerings            100
                                ----
TOTAL INCOME                     100

TOTAL EXPENSES                     0

TRANSFERS
   Transfer to Missions          -15

                                ----
NET INCOME                        85
                                ====

Code: Select all

MISSIONS FUND

TOTAL INCOME                       0

TOTAL EXPENSES                     0

TRANSFERS
   Transfer from General          15

                                ----
NET INCOME                        15
                                ====

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COMBINED INCOME & EXPENSE
INCOME
   Tithes & Offerings            100
                                ----
TOTAL INCOME                     100  

TOTAL EXPENSES                     0

TRANSFERS
   Transfer to Missions          -15
   Transfer from General          15
                                ----
TOTAL TRANSFERS                    0

                                ----
NET INCOME                       100
                                ====

This method does not overstate income or expenses because these transfers are moved to a different section that balance each other out in the consolidated view.

[Heidilr1]

Along these lines, but a little different:

When money comes in that is a pass-thru (getting passed on to a specific mission organization), it is deposited in the general fund, but transferred to the missions fund and paid from there.

What is the best way to set up the debit & credit in the contributions module?

Based on that piece of the puzzle, I may need to know how to show the transfer of funds as well.

Thanks again,

[NeilZ]

Along these lines, but a little different:

When money comes in that is a pass-thru (getting passed on to a specific mission organization), it is deposited in the general fund, but transferred to the missions fund and paid from there.

What is the best way to set up the debit & credit in the contributions module?

Based on that piece of the puzzle, I may need to know how to show the transfer of funds as well.

Thanks again,

Is the transfer from a separate checking account ?? If not, you can just setup the debit and credit to the appropriate accounts under the mission fund.

If so, you'll have to use transfer accounts, in which case the answer will be in the post after your answer

[Heidilr1]

It's coming into the GF (1 checking account) and getting moved to a separate checking account (which is where the MF is).

Can you set up a debit and credit to different funds in the contribution module or do the funds needs to match?