Recording Temporarily Restricted Transaction ??

[Shelley]

I am using v11. We have one fund and two checking accounts. Checking #1 is the primary account and Checking #2 is the account where temporarily restricted monies are held. Our emergency fund is one of those temporarily restricted accounts.

A check was written for $10k from Checking #1 to Checking #2. The purpose of this transaction was to move $10k to the emergency fund. I credited Checking #1 for $10k and debited Checking #2 for $10k. What do I do now? I don't know how to add the $10k to the temporarily restricted account called emergency fund. I know I must credit it, but what do I debit?

Blessings,
Shelley

[JohnDMeyers]

You don't really need to use restrictions for this type of use of money. Putting it in an emergency fund is sufficient. The idea of restrictions on donations is to honor donor requests and still give tax-deductible receipts for the contributions.

Therefore, the mechanism to setup and disburse restrictions is tied to the contributions. To move into and out of a restriction after the money was received as "unrestricted" is messy.

You will need to move money from your unrestricted income into restricted income, move money from your unrestricted net assets to restricted to record the move. Then, you will need to make an entry in a release income account, and a general income release account to use the money.

Can you see that I am trying to persuade you not to do this?

I would recommend moving the money to your emergency checking account, and not use restrictions, because I am assuming that the money came into the church with no requested restriction, and you are making an internal decision to use the money for this purpose. It is no different that deciding to use the money for any other purpose.

[Shelley]

I could very easily be persuaded not to do this. Your comments sums it up very nicely.

The idea of restrictions on donations is to honor donor requests and still give tax-deductible receipts for the contributions. Therefore, the mechanism to setup and disburse restrictions is tied to the contributions.

You are also correct in assuming that this particular transaction is an internal decision. That is not always the case. Our building fund is in the same checking account and we do sometimes get contributions specified for that fund or do fundraisers for it. I guess that is why I was thinking they needed to be temporarily restricted.

We are a congregation of less than 400. We don't use the contributions module of PowerChurch. We don't track individual contributions, except when the contribution requires a receipt and then we handwrite those. Based on your comments about contributions and receipts; I am thinking none of the funds (we have about 6) people sometimes contribute directly to need to be restricted. We also move money into some of them monthly out of the general contribution.

So, am I hearing you say to just set-up an expense account called emergency funds or building fund, or whatever, and keep track of them that way?

Blessings,
Shelley

[JohnDMeyers]

That is correct. By moving the money into a separate account, you will be accomplishing your goal, in my opinion.

[Shelley]

Ok. Now that we have clarified that and I have recorded a credit in Checking #1 and a debit in Checking # 2, what transaction do enter to show a credit balance in the Emergency Fund account I just created?

[JohnDMeyers]

When you spend the money out of the Checking #2 account, you will credit the bank account and debit whatever expense account you spend the money on.

Move money from Checking #1 to Checking #2
CR checking #1
DB checking #2

To spend money out of Checking #2
CR checking #2
DB expense account

Does that answer your question?

[Shelley]

No it doesn't. I'm sorry, I am not being clear. An expense account is probably not what I want either. Let me tell you what I need without my non-accountant preconceived notions involved in the equation. I just finished the set-up process and our first month is April. April is also the beginning of our fiscal year.

Our church has one Fund Account with Checking #1 and Checking #2. Checking #1 is the primary account from which day-to-day business occurs. Checking #2 is a special account that holds money earmarked for certain ministries or activities. They are historically named Building Improvements, Memorials-Youth Fund, Emergency Fund, Playground, and New Building Fund. The money comes from special contributions, fundraisers, and our general contribution. I need to be able to show the balance in each of these accounts on reports. We previously discussed that they are not Temporarily Restricted accounts and I can see they are not considered Pass-through either. What are they and how do I set them up? I am seeing that the money to fund these accounts is most often deposited first into the Checking #1 and then a check written to Checking #2.

Blessings

[JohnDMeyers]

Let's take it step-by-step, so you can tell me what you are doing. (I'll use some typical account numbers)

When you receive $100 into your church, you need to do this:
DB 01-1110-000 Checking #1 $100
CR 01-4010-000 Income account $100

Move $100 from Checking #1 to Checking #2
CR 01-1110-000 checking #1 $100
DB 01-1120-000 checking #2 $100

To spend $100 out of Checking #2
CR 01-1120-000 checking #2 $100
DB 01-5180-000 expense account $100

I can't think of any other necessary transactions. You incoming money is recorded in Income. You outgoing money is recorded in Expenses. Both of these are on your Income and Expense Report.

Your balances are on your Balance Sheet.

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It occurred to me that you may have received money into your church like this:
DB 01-1110-000 Checking #1
CR 01-1120-000 Checking #2

This would be incorrect. It has to be recorded as Income.

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or this would also be incorrect:
DB 01-1110-000 Checking #1
CR 01-3110-000 Unrestricted Net Assets

(this one is used only to set up a beginning balance)

[Shelley]

John, I so appreciate your patience with me. We will get through this and be on the same page soon.

When you receive $100 into your church, you need to do this:
DB Checking #1 $100
CR Income account $100

Move $100 from Checking #1 to Checking #2
CR checking #1 $100
DB checking #2 $100

We are good up to this point. Say that $100 now in Checking #2 is intended for "Building Improvements," how do I show that $100 balance in "Building Improvements?" Should it be a liability account of some kind?

[JohnDMeyers]

I understand, now. You want to categorize the money in Checking #2.

I would do it by creating sub-accounts under Checking #2.

Create 01-1120-000 (level 4 - GROUP ASSET) CHECKING #2
Create 01-1120-001 (level 6 - Detail Asset) Building money (or whatever)
Create 01-1120-002 (level 6 - Detail Asset) Emergency Cash (or whatever)
Create 01-1120-003 (level 6 - Detail Asset) Repairs (or whatever)

Transfer the money like this:
DB 01-1110-000 Checking #1
CR 01-1120-002 Emergency Cash (Checking #2)

When you run your reports, the total in Checking #2 will be totaled, and you will see how much is in each sub-account.

To spend money:
CR 01-1120-002 Emergency Cash (Checking #2)
DB 01-5120-000 Emergency expense

Does that help?

[Shelley]

Yes! Thank you for your patience. What a simple solution that was.