Liability vs. Expense

[Shelley]

Remember I am not an accountant. This crash course is killing me. I use v11. I am past the account set-up and am entering detail for November 2010.

I set up the children's homes and missionaries we regularly support as expense accounts. I found I needed to set up pass through accounts for some of these same missionaries and children's homes, because we get special contributions for them. I have done so. This begs the question: Was I supposed to set them up as liability accounts in the first place? I am finding I have liability accounts and expense accounts for the same people or institutions. Can someone shed some light into my accounting darkness?

Blessings,
Shelley

[JohnDMeyers]

for pass-throughs, a liability account is all you need.

[Shelley]

Do I need an expense account for those that we send regular monthly support to out of the regular contribution?

I think my question is arising from the fact we get pass-thru funds for some of the same people we send regular monthly support. Do I need an expense account for the monthly support or do I use the liability account to pay our regular pledged monthly support?

What is the working difference between a liability and expense accounts?

Blessings,
Shelley

[NeilZ]

Do I need an expense account for those that we send regular monthly support to out of the regular contribution?

I think my question is arising from the fact we get pass-thru funds for some of the same people we send regular monthly support. Do I need an expense account for the monthly support or do I use the liability account to pay our regular pledged monthly support?

What is the working difference between a liability and expense accounts?

Blessings,
Shelley

A liability is something that you are REQUIRED to pay, such as payroll taxes. You should have a liability account for taxes you withhold, this money is not owned by the church. Same thing for employer paid taxes, you have an expense account that you collect the taxes from, and you should be placing them in a liability account that is then paid out of. Your special collection pass-thru money falls under this area.

Now, the funds that the church budgets for support of the third-party is something that is freely given, it is not required that you pay, so this falls under an expense. Much like your office supplies, these are items that you pay for as an expense. I know, weird comparison, but they act much the same.

[Shelley]

Thank you. That makes the mud a little viscous. So, what I have learned from this post is that it is fine and expected in certain cases to have a pass-thru liability account to Missionary #1 AND an expense account to Missionary #1. I am not making some huge accounting faux pas.

Blessings,
Shelley