Transferring monies between funds - 4 line transaction?

[Bill Miller]

A question on your instructions for transferring money between funds: do you "always" have to use a four-line transaction (asset transfer and income transfer).

This is my situation. We started a new church on Jan. 1 which was a merger of two churches. We started our accounting by creating asset transfer accounts (3001 under fund balance) to bring in assets from the two original churches without reporting these amounts as income. They were already reported as income in the old churches. By default this money went into the general fund.

Later in the year we decided to move $10,000 which came from the old churches from the general fund to the building fund. Here is my problem: if I enter this as an asset transfer AND an income transfer (4 lines) it shows up as a $10K deficit in the bottom line of the income over expenses statement for the general fund. If our actual deficit is $2K (during the year we've spent $2K more than we've taken in) it shows up as a $12K deficit. But that extra $10K was not income to start out with. It seems our deficit is $10,000 more than it really is.

Of course the building fund shows $10K more income than it really took in. The consolidated reports are OK of course. Regrettably my knowledge of accounting is very limited, but this seems counterintuitive to me. Do you really have to include an income transfer transaction when you transfer between funds even when the amount transferred is not income (at least not this year, and not for this church)?

[Zeb]

One of the main reasons for this is you have to have equal debits and credits within a fund, so when you need to move money from one fund to another a simple debit to one fund and credit to the other will throw both funds out of balance. To better understand look at the trial balance report. If you have equal debits and credits all of your fund totals will be 0, if you don't then you will have a fund out of balance. Like you have said, when you run the consolidated statement all is OK, and that is by design for the above reason. It should be easily explained if your income account is called something intuitive like Income Transfer.

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