Based on proper accounting, when I record our mortgage pmt., the principal portion is a reduction in the liability and does not affect the income statement (interest does affect the income statement). Yet, for our congregation, we want to show the entire mortgage pmt as an "expense" of the church that year (we need people to give for the whole pmt, not just the interest portion ).
How can I reflect the principal pmt. in my powerchurch reports as part of our expenses? If I can't, what do I do?
Here's a reply that JEFF gave to someone looking for much the same setup:
This is what we have seen some churches do. When they write the mortgage payment they credit bank & debit a mortgage expense. Then they make an adjustment to debit the mortgage liability and credit the unrestricted equity account.
This is not technically 100 percent correct accounting as it does overstate expense, but it does keep from having to explain why all cash outflows are not expenses and keeps the budget reports easier to understand.
From what I can see, this would involve creating a separate transaction to take care of the liability and equity, but it would do what you want.
I emailed NeilZ with the following question and as per his request I am posting it in the forum. I was asking this in response to his previous answer to the question of how to record the total P&I pmt on a mortgage liability as an expense for budgeting and reporting purposes.
>
> I have recently installed PC+ for our church books. I took over for a
> treasurer who kept church assets such as CDs, savings and the church
> building on separate Excel spreadsheets. He only kept Income and
> Expenses in Quickbooks recording the entire mortgage payment as an
> expense. For budgeting purposes, as was pointed out in your response, this works well.
> When I installed PC+, I brought the church assets back onto the books
> including the building mortgage liability, and I have been recording
> the P&I pmt as an expense which I prefer. As you stated, though, this
> overstates expenses, and since that is true, then doesn't that cause a
> corresponding understatement of equity on the Balance Sheet. I was
> wondering how you fixed that. Do you export the report to Excel and
> make the corresponding adjustments to reflect a truer position or is
> there some way to fix the reports themselves so that isn't necessary?
> Since we have the loan for our building with our synod's Church
> Extension Fund, I must file our financial statements with them once
> per year, and I would like those statements to reflect the church's true current financial position.
Ken Leib
Elder
Abiding Word Evangelical Lutheran Church
Maineville, Oh
Remember, I cut and pasted that from an answer that JEFF gave to a similar question. Not all situations are the same, which is why I always recommend posting a question on the forum.
Just a reminder. There are three financial statements that generally summarize the financial situation at a church.
The Balance Sheet
The Income and Expense Statement
The Cash Flow Statement (or Sources and Uses of Cash)
PowerChurch doesn't really address the third one. It covers non-expense cash inflows and outlays, such as mortgage payments, depreciation, other debt payments, etc.
I have to construct our Cash Flow Statement each year on a spread sheet. It may be the missing piece you are trying to construct by making your mortgage principle an expense. It may be better to look into preparing a Cash Flow statement, instead.
You can watch my PowerChurch tutorials now on YouTube!
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