Cash Received at Closing

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HolderS
Posts: 6
Joined: Tue May 24, 2022 11:31 am

Cash Received at Closing

Post by HolderS »

The church recently refinanced the mortgage. They did not intend to receive cash back at the closing but that is what happened (direct deposit into the church account). The pastor does not want to show the money as income. What is the best way to record this? Thanks.

Sheilah
Powerchurch Online

NeilZ
Posts: 10209
Joined: Wed Oct 08, 2003 1:20 am
Location: Dexter NM
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Re: Cash Received at Closing

Post by NeilZ »

HolderS wrote:
Mon Feb 27, 2023 9:50 pm
The church recently refinanced the mortgage. They did not intend to receive cash back at the closing but that is what happened (direct deposit into the church account). The pastor does not want to show the money as income. What is the best way to record this? Thanks.

Sheilah
Powerchurch Online
Unfortunately, it is income in a way, but you can possibly use that to 'refund' some funds to your mortgage expense by Crediting that expense, and Debiting the checking account. You can then send the additional funds, if you want, along with the normal monthly payment for the mortgage.

So, if you got $2000.00 in cash back, and have a monthly payment of $1000.00, the initial transaction in Funds Accounting would be

(NOTE: all these are examples, you would create the check the way you usually do including any interest expense, etc

01-5500-000 Mortgage expense CR $2000.00
01-1110-000 Checking DB $2000.00

I would include in the note area of the transaction EXACTLY where the funds are coming from for audit purposes.

Then when the monthly payment is due the check would look something like this:

01-1110-000 Checking CR $3000.00
01-5500-000 Mort. Exp DB $1000.00
01-5500-000 Mort. Exp DB $2000.00

Again, include as much explanation of the additional funds as necessary for future audit purposes.

These two transactions will then bring the expense account's budgeted amount in alignment with what was paid out. The $1000.00 is the normal budgeted expense, and the $2000.00 was added then subtracted (by paying it out) and the budget stays the same.

Does this help ??
Neil Zampella

Using PC+ since 1999.

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