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Spending restricted funds raised in prior years
Posted: Fri Mar 11, 2005 10:14 am
by SBCTrustee
Hello Everyone,
I don't have a complete understanding as to how to handle restricted funds in PC+ v.9.
Supposed all of the restrited funds were raised say two years ago. Suppose that you wanted to now spend some of these funds, say winter utility bills (authorized in the restriction document).
What would be the complete accounting transaction?
If there were no other income restricted or non-restricted income to come in, would my income statement then show a negative income as a result of the use of restricted income from a prior year?
Tom
2nd Baptist Church
Posted: Fri Mar 11, 2005 1:38 pm
by Jeff
This is how it would be handled in version 9. 900 is in the bank account and $500 is restricted for winter utility bills, and you were going to use $150 of the restriction.
Prior to spending the money the balance sheet would look like this:
Code: Select all
Cash 900
Equity
Unrestricted Equity 400
Temp Restricted
Winter Utility Restriction 500
Total Equity 900
The transaction to use the money would look like this:
Code: Select all
Debit Credit
Utilities 150
Cash 150
Winter Utility Release 150
Release from Restriction 150
After posting this transaction your balance sheet would look like this:
Code: Select all
Cash 750
Equity
Unrestricted Equity 400
Temp Restricted
Winter Utility Restriction 350
Total Equity 750
Your income and expense statement would look like this:
Code: Select all
Income
Contribution Income
Restricted Income
Release From Restrictions
Winter Utility Release -150
Released from Restrictions 150
Subtotal Release from restrictions 0
Total Income 0
Expenses
Utility Bills 150
Total Expenses 150
Net Income -150
Maybe easier to understand would be the new Statement of Activies report that would look like this:
Code: Select all
Temporarily
Unrestricted Restricted
Income
Contribution Income
Restricted Income
Release From Restrictions
Winter Utility Release -150
Released from Restrictions 150
Subtotal Release from restrictions 150 -150
Total Income 150 -150
Expenses
Utility Bills 150
Total Expenses 150
Net Income 0 -150
What you see from the statement of activies that there was no change in unrestricted money but there was a change of -150 in temp restricted amounts.
A couple of accounting concepts to understand. The release transaction "reclassifies" money from restricted to unrestricted. An easy way to understand this is the transaction "releases" the money from its restriction. The second is that all expenses must come from unrestricted money. This is what we see above. The transaction reclassifies the restricted money to unrestricted and spends it all in one transaction.
I don't know if I have helped you or made things more confusing.
Posted: Fri Mar 11, 2005 2:02 pm
by Matt
Jeff,
Great explanation and example of how the restricted accounts are supposed to work!
Now I understand Restricted funds
Posted: Fri Mar 11, 2005 3:32 pm
by SBCTrustee
Hello Everyone,
You can not believe how helphful you have been. One night this was on my mind at about 2::00 A.M. I actually got up & just like any good accountant, I began to draw "T ACCOUNTS", trying to figure this thing out.
Now, I believe that I understand!!!!
This forum is better than sliced bread. I wish other companies would provide a service like this.
Tom