Accounting setup - income and expense

[debbieg]

I am finally going through the accounting setup. I have reached the part where I am customizing the chart of accounts. This will probably be clear later when we are using the software but I wanted to make sure that I was getting things set up properly in the beginning.

I understand the concept of temporarily restricted accounts and have several set up. I see that the software has automatically set up both income and expenses for these accounts.
My question is for my regular expense accounts. The majority of the expense accounts are the items from our budget. They give us a guideline for spending but the budget amount doesn't necessarily mean that there is
actually that much money sitting in a pot. So what do you do for budget accounts that sometimes have actual direct income. This only occurs in a few areas. One of them is under student ministries. There is a line item for "Activities & Events" that has a budget amount. So I have set that up as an expense account. Sometimes the youth will contribute money towards events to offset the cost. Will that just go as a credit against the expense account or do I have to set up a separate income account for that same line item? If there is an income account, how are they tied together?
I figured it would be easier to get this straight at the beginning instead of having to fix transactions down the road. Thanks for any input.
Debbie

[tborgal]

Debbie,

You can do this either way. You can just credit you debit or expense account or you can create an income account and tie the two together by using the same sub-account number for both. This would be the last three digits in the account number xx-xxxx-101. As an example.

[debbieg]

Thanks Tom.
I was initailly thinking that I would just credit my expense account if that was possible. but now that I've thought about it, it might be more useful to have the separate income account to show when money was collected for these categories.

Are there any advantages to one method over the other?

Debbie

[JohnDMeyers]

Crediting and Debiting the expense account is kind of analogous to using a single entry system like quick books. You will be able to look at one account and know the net of how much came in and how much went out.

In a double entry system, like PowerChurch, you are better off using the income account to record the income and the expense account to record the expense. It's a hassle, on the one-hand, because the two accounts don't appear next to each other on standard reports, but it maintains the integrity of all the reports.

I agree with Tom, you can do it either way. But as you advance in using the features in PowerChurch, the better way is to get used to using two accounts.

[debbieg]

OK, I'm reviewing my chart of accounts again and realize that some of the things that I set up as "temporarily restricted" accounts shouldn't have been. I believe that I should have just set up income accounts to go against the budgeted expense account as we discussed above. But, I don't see a way of deleting these during the setup. Is this true? If so, will I be able to easily delete them once I finish the setup and before any transactions are entered?
Thanks,
debbie

[JohnDMeyers]

I recently hit the RESET ACCOUNTING button and rebuilt our chart of accounts.

I wanted to start with a "clean slate" and start from scratch. I was able to go through and delete every account except those that were associated with payroll. I had to first go into payroll and delete all the pay items. After that, there were very few that I couldn't delete.

I can't remember if the payroll was connected to Temporarily Restricted income.

[debbieg]

We have no accounting data out there; this is our first time using this. But I have spent too much time customizing this chart of accounts. I can't bear the thought of re-entering all this data again.

so my question remains....is there a way to get of "restricted" accounts during setup? Or can i easily do it after setup is complete?

[JohnDMeyers]

You can easily do it after your setup is complete as long as you don't post any data to the accounts.

It's simply locating the account number in Maintain Chart of Accounts and clicking on DELETE.

[wms7328]

You can essentially delete any account by making it inactive. You do this by using Maintain Chart of Accounts and unchecking the Active box in the account details screen. An inactive account will not show up on reports or on Chart of Accounts unless you ask for inactive accounts to be included. However, I also think you can permanently delete any account if it doesn't have any activity posted to the account.

One thing I use for those items that have expenses and income associated with them. I've set up a separate accounting fund that is essentially considered a pass through fund. For items that church is reimbursed for by members, i.e. books, tickets, camps, etc. this account captures the income and expense associated with those items. Then at the end of the year or any other time you want, you can always post the excess income or expense to your regular operating account. For instance, each year we run a drama camp in summer. People pay for the camp but that usually doesn't cover the entire expense, so we also have a few thousand dollars budgeted in our regular operating account. After I get all the income and expenses for the camp recorded, I transfer the excess expenses back to operating account to be posted against the budget for that item. This allows you to see how much of the expenses are balanced by income for each item.

[debbieg]

Thanks. I was assuming I would be able to do that but was afraid to move forward and get myself locked into something.
Your situation sounds very similar to what I'm dealing with. But do I really need to have these in a separate operating fund? From the earlier posts it sounds like I can set up income accounts for these areas and tie them to expense accounts through the sub-account number. Then I can see the total income and expense for that particular category. Am I following this right?
Debbie

[NeilZ]

Thanks. I was assuming I would be able to do that but was afraid to move forward and get myself locked into something.
Your situation sounds very similar to what I'm dealing with. But do I really need to have these in a separate operating fund? From the earlier posts it sounds like I can set up income accounts for these areas and tie them to expense accounts through the sub-account number. Then I can see the total income and expense for that particular category. Am I following this right?
Debbie

Debbie, you really do NOT need to have a separate fund for these items, its really up to you if you want to do so.

[wms7328]

Neil is correct, you don't have to use a separate fund. However, if you use the subaccount number to designate this, you might want to check out the reports that you can run. You don't have a report available using subaccounts, that looks like the income/expense report that you may be used to seeing. A sub account report is available, but it doesn't give you the same report format as income/expense reports.

One reason I use a separate fund is that it keeps the reimbursed expenses for things like books, camps, classes, etc. out of the income /expense report for our church operating fund. Now I do use subaccount numbers to designate the committee that is assigned responsibility for each expense item. I've written a custom report that shows an expense report sorted by subaccount that looks more like the regular income/expense report.

Hope I haven't confused you.

[debbieg]

Thanks for the input from both of you. I was wondering about the reports. I'm sure a lot of this will be clearer after everything is up and running but was trying to avoid too many changes after the fact.
I'll let you know what happens.
debbie