Transfer between accounts-1 fund, 1 checkbook

[mr-chipster]

Small church, one fund, one checkbook. What is the best way to make transfers between accounts:

Between temporarily restricted accounts
Between expense accounts
Between temporarily restricted accounts and expense accounts

[NeilZ]

Small church, one fund, one checkbook. What is the best way to make transfers between accounts:

Between temporarily restricted accounts
Between expense accounts
Between temporarily restricted accounts and expense accounts

What are you 'transferring' between expense accounts? On the restricted accounts, are you talking income? And what are you 'transferring' between a 'restricted account' and expense accounts?? Details below.

Normally, you should never transfer between expense accounts. If you made a mistake when entering a check, you should void the check, then reissue using the manual check function with the correct expense account. This maintains the audit trail, and shows that there was a correction. You have no such audit trail in a simple transaction.

I'm going to assume that you're transferring funds between restricted INCOME accounts. Not knowing where the funds came from, (contributions, redemption of endowment, special donation, etc), its hard to give any advice. Could you give more detail?

As far as transferring between a 'restricted' account and an expense account. That's just not done. Again, could you give more detail on what you're trying to do ??

[mr-chipster]

Our church has been using PowerChurch for years, but now I need to understand it. I'm scrolling through posted transactions and have arrived at transfers:

A transfer between funds from a generic outreach temporarily restricted fund to another outreach fund that is also temporarily restricted. It was done debiting the expense account of the first fund and crediting the income account of the second.

A certain amount has been transferred each month from the Operating Fund (unrestricted net assets) to an HRA temporarily restricted fund by crediting the Operating Fund equity account and debiting the HRA equity account.

Is this best practice?

[NeilZ]

Our church has been using PowerChurch for years, but now I need to understand it. I'm scrolling through posted transactions and have arrived at transfers:

A transfer between funds from a generic outreach temporarily restricted fund to another outreach fund that is also temporarily restricted. It was done debiting the expense account of the first fund and crediting the income account of the second.

FWIW ... restricted funds do not have an expense account unless its specifically setup to close to the Restricted Fund's Fund Balance (3100 series) account. You can have an expense account that is mainly used with the restricted fund, but debiting the expense account then crediting income is basically doubling your income.

You've already listed income to the 1st restricted fund, by debiting an expense you're spending funds. By then crediting the 2nd fund, you're showing additional income that really isn't there. What should have been done is to DEBIT the fund balance account of the 1st fund, then CREDIT the fund balance account of the 2nd fund. This moves the funds, and maintains showing the income where it originally came in.

The method that was used did this: if you had 1000 in the 1st fund, and 1000 in the second. When the previous person 'spent' the funds by DB say $100 using the expense account, if that expense account closed to the 1st restricted fund, it would reduce the fund balance by 100, but not show any reduction in the income. If it didn't close to the restricted fund balance, that's a different issue completely.

They then added the 100 to the 2nd fund income. So for the year you would see $2100 in income according to the reports, but the total fund balances of the two would still show 2000. Your reports would be completely off, not to mention the balance sheet.

A certain amount has been transferred each month from the Operating Fund (unrestricted net assets) to an HRA temporarily restricted fund by crediting the Operating Fund equity account and debiting the HRA equity account.

Is this best practice?

FWIW .. equity/net assets/fund balance all the same thing. Let me get this straight .. they want to transfer FROM the operating fund TO the temp restricted fund, and they CREDITED the operating and DEBITED the temp restriction?? This is backwards. The 3000 level funds , whether unrestricted or not INCREASE when you CREDIT them, and DECREASE when you DEBIT them.

I suspect that when you run a Cash Management Report you may see some interesting numbers. I'd also run a Balance Sheet (not a trial balance) to see what that shows.

That said, transferring funds from Unrestricted to Temp Restricted using the equity/net assets/fund balance accounts within one accounting fund is proper, but it should be a DEBIT from the operating and a CREDIT to the temp restricted fund.

Finally, if you do run a Trial Balance report, the ideal result is on the last page the totals of all three columns are zero.