Is an expense account needed?

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cbrown
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Is an expense account needed?

Post by cbrown »

We just set up a temp restricted building fund with its own equity, income and release accounts. If I write a check how is the transaction recorded? Is an expense account necessary to record the check against? Or do I write the check against the Equity Account? Thanks.

NeilZ
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Re: Is an expense account needed?

Post by NeilZ »

cbrown wrote:We just set up a temp restricted building fund with its own equity, income and release accounts. If I write a check how is the transaction recorded? Is an expense account necessary to record the check against? Or do I write the check against the Equity Account? Thanks.
Yes .. you have to reflect an expense account. You DO NOT write checks against the Equity/Net Assets/Fund Balance account.

If this question is related to the one on transfer accounts, please let us know.
Neil Zampella

Using PC+ since 1999.

cbrown
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Re: Is an expense account needed?

Post by cbrown »

Well, I didn’t think it was, but now I guess it is. Thanks again.

NeilZ
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Re: Is an expense account needed?

Post by NeilZ »

cbrown wrote:Well, I didn’t think it was, but now I guess it is. Thanks again.
In your case, with a transfer account you debit and credit through those transfer accounts, as you can see in the transfer account example. This assumes that both funds are using the same checking account.

If, however, there are two separate bank accounts, you would need to show an expense account when you write a check to move the funds. Otherwise you would unbalance the accounting funds.
Neil Zampella

Using PC+ since 1999.

cbrown
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Re: Is an expense account needed?

Post by cbrown »

I’ve been reading the “accounting for contributions”material and now I’m confused again. In their examples when they purchased cribs there is no associated expense entered in the income and expense sheet. However when they buy flowers there is an expense line included. I guess I’m unclear as to when an expense account is used for making purchases against a temporarily restricted account.

cbrown
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Re: Is an expense account needed?

Post by cbrown »

OK now I get it. I just went through the accounting training modules that pertain to this and now I'm pretty sure I understand. Thanks.

NeilZ
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Re: Is an expense account needed?

Post by NeilZ »

cbrown wrote:I’ve been reading the “accounting for contributions”material and now I’m confused again. In their examples when they purchased cribs there is no associated expense entered in the income and expense sheet. However when they buy flowers there is an expense line included. I guess I’m unclear as to when an expense account is used for making purchases against a temporarily restricted account.
FWIW ... if you mean the Knowledgebase article, don'r use that as it has not heen updated in a while. Use the PCPlus v12 Users Guide starting on page 177.

On page 185, they have an updated example about choir robes. There is a note at the bottom that says:
Note: The above example shows you acquiring a new Asset: Choir Robes. You could just as easily be recording an Expense, or paying against a Liability. The second part of the transaction, the Release From Restriction would be the same in any of these scenarios.
You have to look at the ACCOUNT NUMBER being used, the 1000 series number in both the old version and the new version shows that you're using assets. The checking account, as an asset is 1110-000, the choir robes are being tracked as an ASSET, 1850-000 . The Equity/Fund Balance/Net Assets (3000-series) account is NOT TOUCHED or used in any way in either set of examples.

So, unless the item you're purchasing is being tracked as an asset in an accounting fund, you need to have an expense account to DEBIT.

Do you follow?
Neil Zampella

Using PC+ since 1999.

cbrown
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Re: Is an expense account needed?

Post by cbrown »

I do follow that.

If I setup a new expense account for our building renovation equity account and write checks, won't that have a negative impact on my budget report? It would be an unbudgeted item. Not sure if I'm asking this correctly. I have not gone through setting up the budget since I started as treasurer after the new year started.

NeilZ
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Re: Is an expense account needed?

Post by NeilZ »

cbrown wrote:I do follow that.

If I setup a new expense account for our building renovation equity account and write checks, won't that have a negative impact on my budget report? It would be an unbudgeted item. Not sure if I'm asking this correctly. I have not gone through setting up the budget since I started as treasurer after the new year started.
OK . before I answer, I need to know this:

1. You're keeping all the temp restricted funds under operations, right?
2 If so, do you have a renovation budget?
Neil Zampella

Using PC+ since 1999.

cbrown
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Re: Is an expense account needed?

Post by cbrown »

1. yes
2. no. we have buildings expense accounts, but none designated for renovations.

NeilZ
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Re: Is an expense account needed?

Post by NeilZ »

cbrown wrote:1. yes
2. no. we have buildings expense accounts, but none designated for renovations.
Well the obvious thing to do is add a new expense account for these renovations, and add a budget based on estimated spending for the renovations. I would think the church board has agreed to these renovations, so they shouldn't have much of a problem approving a budget adjustment.
Neil Zampella

Using PC+ since 1999.

cbrown
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Re: Is an expense account needed?

Post by cbrown »

Well, That’s exactly what I was thinking I’d have to do. Since we have a lot of temporarily restricted accounts, I’ll have to add expense accounts for each one of those for when we use money from those accounts. Seems like our account list is growing day by day, am I overthinking all of this? I like the transparency of multiple accounts, but it’s getting more difficult to manage. I think the old adage the more I learn the less I know applies here.

NeilZ
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Re: Is an expense account needed?

Post by NeilZ »

cbrown wrote:Well, That’s exactly what I was thinking I’d have to do. Since we have a lot of temporarily restricted accounts, I’ll have to add expense accounts for each one of those for when we use money from those accounts. Seems like our account list is growing day by day, am I overthinking all of this? I like the transparency of multiple accounts, but it’s getting more difficult to manage. I think the old adage the more I learn the less I know applies here.
You don't have to duplicate existing accounts. If you have an account for worship equipment, you don't have to create another account if you're going to use temp restricted funds to buy some equipment, you can use that account.

Same thing if there are funds to cover costs of other items. If you have an expense account that covers the purchase, all you have to do is release those funds.

However, based on what you said, you don't have an expense account to cover this, but if you have an account that is used for building repairs/updates, you can use that, and get the church board to authorize a budget adjustment.

Again, don't make it harder than you have to. As long as you have the temp restricted funds setup through the 'Maintain List of Donor Restrictions', any release is tracked by the system, and since you should also have an invoice for services/purchases, you have that audit trail.
Neil Zampella

Using PC+ since 1999.

cbrown
Posts: 94
Joined: Sun Dec 21, 2014 7:50 am

Re: Is an expense account needed?

Post by cbrown »

Sounds like a reasonable plan. Thank you very much, I really appreciate your help.

cbrown
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Joined: Sun Dec 21, 2014 7:50 am

Re: Is an expense account needed?

Post by cbrown »

I gave a transcript of this entry to the president of our corporation and he is in agreement that we need to set up expenses for our donor restricted account disbursements. We’ve been using Power Church for about 15 or 20 years, and previous treasurers always charged the equity accounts directly. What are your thoughts about setting up one expense account to cover all disbursements from the restrictions, knowing that the release accounts will show details of where the money went? Then we wouldn't have to change our budget, since we don’t know how much is going to be disbursed to the temporarily restricted accounts. We would see the expense account on the income and expense report and understand that it’s not really a budget issue. We have 25 temporarily restricted accounts, each one tied back to a contribution account.

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