Spending restricted funds raised in prior years

[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

[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.

[Matt]

Jeff,

Great explanation and example of how the restricted accounts are supposed to work!

[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