Deferring donations or pledges to next /previous year

[mikethekey]

Is it possible and if so, What is the easiest way to move pledges and other contributions so that they show as income in the next/ previous years? We would like to defer the income for a large contribution made in 2012 forward to 2013. And also revert some late pledge payment made in 2013 back to 2012.

[NeilZ]

Is it possible and if so, What is the easiest way to move pledges and other contributions so that they show as income in the next/ previous years? We would like to defer the income for a large contribution made in 2012 forward to 2013. And also revert some late pledge payment made in 2013 back to 2012.

I take it you're looking for the proper way to account for these in Funds Accounting, right ??

The reason I say that is that under Contributions, there's not much you can do about giving statements on this. Money given in 2012, must show up on a Contributor's statement for 2012, and the same for those late 2013 payments. Those are the IRS rules.

I'll leave the accounting issue alone, as I'm not as familiar with what to do in this type of instance.

[mikethekey]

Yes--the answer to your question. I am concerned about the Accounting Module, and if it is possible to defer income from one year to the next for budgeting purposes.

[JohnDMeyers]

Technically, your income has to be recorded in the year that it was received. The donor will likely want to claim the large gift in the year that it was given on their taxes, and you need to have records to back them up in case they are audited.

[mikethekey]

The question came up in a budget discussion. We are aware of the donor's tax issue. We were wondering if for internal church budgeting it was possible in PC+ to somehow defer the income to the next year. We have used the "restricted funds" feature to identify and separate part of the donation to be used for 2013 operation. However, that stills credits the income to 2012, the year it came in. I am starting to think it is not possible.

[JohnDMeyers]

If the gift came in "unrestricted" you can use the restriction functions to "set aside" that money.

You can also take "unrestricted" donations and create a separate sub-account in your checking account to "remember" not to use the money for general purposes. That's what we do.

Either way, the "2012 income" will become "2013 equity". That's the main difference.

Trying to cross the boundary from 2012 to 2013 in either direction with "income" messes with the equity and the closing of accounts.

Income and Expense accounts "close" at the crossing of 2012 into 2013.

[Jeff]

The GAAP accounting answer income is to be recorded in the period it is earned. With donations there is no earning component so it is recorded when it is received. I am simplifying this a little bit, but this is the GAAP logic to when income is to be recorded. GAAP does not concern itself with budgeting considerations though and have to deal with people giving money in 2012 to pay for their 2013 pledges.

I say this so you will know this is not technically correct accounting wise. But if you want to defer income from one year to the next, you can use a liability account.

Create a new liability account and name it appropriately.

At the end of the 2012 you would debit the income account and credit a liability. This moves the income to liabilities. Then in 2013 you debit the liability and credit the income account. If it is a rather large amount, you may want to do this over several months to spread out the income.

Note that if you have your books audited, the auditor will say this is not GAAP. But this will let you move that income to the next year to make your budget look right.

For what it is worth, 2 years ago I went to a day long seminar on non-profit accounting issues given by a well known non-profit accounting CPA. I asked him what was the correct way to do this. He said there wasn't one. His only suggestion was to keep 2 sets of books, one for GAAP and another set for budgeting purposes. GAAP is very clear that income is to be recorded in the period it is realized or realizable and earned.