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Is it ever okay to credit income to an expense account? Reason is....
The church board is very strict with their budget. When they have an event that they collect money for (ex. Ladies Tea), they want the donations and/or amount charged for the event to be deducted from the expense for the event. Everything that this applies to is non-tax deductible donations. The only possible solution I can come up with is to credit the donations to the expense account thus lowering the expense and keeping the budget on track . They will not consider setting up a separate fund and with how many areas this has the potential to spread in to, I don't think that would be the best choice. I know this is probably not proper accounting, however, it is the only solution I have come up with that does not require me to export the reports and manually adjust everything. Any suggestions would be appreciated.

Sheilah
Version 11.1

Sheilah wrote:Is it ever okay to credit income to an expense account? Reason is....
The church board is very strict with their budget. When they have an event that they collect money for (ex. Ladies Tea), they want the donations and/or amount charged for the event to be deducted from the expense for the event. Everything that this applies to is non-tax deductible donations. The only possible solution I can come up with is to credit the donations to the expense account thus lowering the expense and keeping the budget on track . They will not consider setting up a separate fund and with how many areas this has the potential to spread in to, I don't think that would be the best choice. I know this is probably not proper accounting, however, it is the only solution I have come up with that does not require me to export the reports and manually adjust everything. Any suggestions would be appreciated.

Sheilah
Version 11.1

In a word, NO.

The board needs to realize that they should be budgeting for every expense (or try to budget for it). Using income to reduce the expense numbers is understating expenses as well as income. You never really get a good picture of what it is costing to run the church. Ask any accountant, and they will tell you the same thing.

They can try to account for the income by creating separate income accounts for such areas. You can then create subaccounts to tie these together so they can see how much is coming in as income, and how much was spent.

So you can have an Income Account for "Deacon Suppers" of 4100-101, and an expense account for "Deacon Suppers" of 5510-101.

When you run the subaccount report, the report will show the income from 4100 and the expenses from 5510, and then show the difference.

You can do this with every area, and just use separate subaccount numbers to tie them together.

Thank you. I knew there had to be another option. Never thought about using the sub-accounts. Will give it a try and see if that will satisfy them.

Sheilah