Accounting Question

[ngaham]

One of our bills provides a discount if we pay by a certain date. I am entering the bill into accounting, but I am not sure how to account for the $30.47 discount? Do I just deduct that from one of the line items or set up an income account for it?

[ngaham]

Let me provide more information. It if a fuel bill that has multiple expense accounts. For example, the School Administrator, Youth Pastor, and all church vehicles are fueled up with this card. I have entered the amounts that each vehicle used, but when I enter the check amount that I am paying it doesn't match the amount in the expense accounts due to the discount.

[NeilZ]

Let me provide more information. It if a fuel bill that has multiple expense accounts. For example, the School Administrator, Youth Pastor, and all church vehicles are fueled up with this card. I have entered the amounts that each vehicle used, but when I enter the check amount that I am paying it doesn't match the amount in the expense accounts due to the discount.

OK .. when you say you enter the amounts, then it doesn't match the amount in the expense accounts, where are you adding the amounts??

Normally you would tally these expenses to a Liability Account as this is a credit card which you reconcile monthly.

If so, what I suggest is this:

1. Enter the amount of the bill on the Invoice.
2. If you have the vendor setup correctly, the checking account should show a credit for the amount you entered
3. The liability account should also show the amount you entered.

So far so good, but now you need to reflect the discount and 'return' the money back to the expense account so

4. Add another line, enter the liability account number, and the amount of the discount enter as a DEBIT. On the line description (and in the invoice notes) enter Early Payment Disc.
5. Then add another line, and enter the EXPENSE account number, the system should then enter the amount remaining in the transaction (should equal the disc amount) as a CREDIT to the expense account.

Everything should then balance, and you're reflecting the discount in the reduced expenses.

[ngaham]

Perhaps a better explanation would help. I'll also tell you what I did. The total bill is 620.00. If I pay by this Friday, it will be $590. The bill is as follows.

120.00 Youth Pastor Fuel (General Fund)
200.00 Church Van (General fund)
200.00 School Administrator (School Fund)
100.00 Church Bus (General Fund)

I put in all of the expense accounts as stated above and then used an income account that I created called Early Bill Pay Savings and added the $30.00 to that. The bottom of the manual check both said 0.00. I did get an error that said, "the debits and credits are not in balance". But, like I said, it said 0.00 on the bottom. I ran an income and expense by fund and it looked like everything hit correctly.

[NeilZ]

Perhaps a better explanation would help. I'll also tell you what I did. The total bill is 620.00. If I pay by this Friday, it will be $590. The bill is as follows.

120.00 Youth Pastor Fuel (General Fund)
200.00 Church Van (General fund)
200.00 School Administrator (School Fund)
100.00 Church Bus (General Fund)

I put in all of the expense accounts as stated above and then used an income account that I created called Early Bill Pay Savings and added the $30.00 to that. The bottom of the manual check both said 0.00. I did get an error that said, "the debits and credits are not in balance". But, like I said, it said 0.00 on the bottom. I ran an income and expense by fund and it looked like everything hit correctly.

But now you overstate the Church's Income ... it may total right, but you're not seeing any additional income, you just haven't spent any.

You really need to talk to an accountant who knows about cash based accounting, and fund accounting specifically, as you're not presenting a correct financial picture to the congregation.

[ngaham]

I found this online. This sounds like what I did, I think...

http://www.double-entry-bookkeeping.com ... -received/

[NeilZ]

I found this online. This sounds like what I did, I think...

http://www.double-entry-bookkeeping.com ... -received/

Actually, no ..

The method I described governs this, since the liability account I describes serves as the AR account in the page you list.

The system does not use an AR account per se, the AR account is in reality the expense account, thus the first transaction there is actually ..

Code: Select all

Account 	               Debit 	Credit
Fuel Expense 	         490 	
Checking 		                         490
Total 	                   490 	 490

However since there is no AR account there would be no credit to clear.

What you do have is this

Code: Select all

Account 	               Debit 	Credit
Fuel Expense 	         500	
Checking 		                         500
Total 	                   500 	 500

So, you need to basically enter the discount.

Code: Select all

Account 	               Debit 	Credit
Fuel Expense 	          	         10
Checking 		            10
Total 	                   10 	    10

With this last set of entries, you're doing what that site says is the Discount Received Accounting Equation. You're putting the $10 back in EQUITY, which is in reality Unrestricted Net Assets. But you're also reducing the overall expense amount instead of leaving it to be shown as money spent, which it wasn't.


However, are you crossing Accounting Funds here?? I see that you're spending funds from a school fund, which also means that you should be accessing a school fund checking account in addition to the General Fund ?

[ngaham]

I found this online. This sounds like what I did, I think...

http://www.double-entry-bookkeeping.com ... -received/

Actually, no ..

The method I described governs this, since the liability account I describes serves as the AR account in the page you list.

The system does not use an AR account per se, the AR account is in reality the expense account, thus the first transaction there is actually ..

Code: Select all

Account 	               Debit 	Credit
Fuel Expense 	         490 	
Checking 		                         490
Total 	                   490 	 490

However since there is no AR account there would be no credit to clear.

What you do have is this

Code: Select all

Account 	               Debit 	Credit
Fuel Expense 	         500	
Checking 		                         500
Total 	                   500 	 500

So, you need to basically enter the discount.

Code: Select all

Account 	               Debit 	Credit
Fuel Expense 	          	         10
Checking 		            10
Total 	                   10 	    10

With this last set of entries, you're doing what that site says is the Discount Received Accounting Equation. You're putting the $10 back in EQUITY, which is in reality Unrestricted Net Assets. But you're also reducing the overall expense amount instead of leaving it to be shown as money spent, which it wasn't.


However, are you crossing Accounting Funds here?? I see that you're spending funds from a school fund, which also means that you should be accessing a school fund checking account in addition to the General Fund ?

I guess the part that is confusing is that you keep saying a liability account. The cards are not actually a credit card. We are not given a "credit line" for it. We go to one gas station and fill up as needed and they bill us monthly for it based on usage.

[NeilZ]

I found this online. This sounds like what I did, I think...

http://www.double-entry-bookkeeping.com ... -received/

Actually, no ..

The method I described governs this, since the liability account I describes serves as the AR account in the page you list.

The system does not use an AR account per se, the AR account is in reality the expense account, thus the first transaction there is actually ..

Code: Select all

Account 	               Debit 	Credit
Fuel Expense 	         490 	
Checking 		                         490
Total 	                   490 	 490

However since there is no AR account there would be no credit to clear.

What you do have is this

Code: Select all

Account 	               Debit 	Credit
Fuel Expense 	         500	
Checking 		                         500
Total 	                   500 	 500

So, you need to basically enter the discount.

Code: Select all

Account 	               Debit 	Credit
Fuel Expense 	          	         10
Checking 		            10
Total 	                   10 	    10

With this last set of entries, you're doing what that site says is the Discount Received Accounting Equation. You're putting the $10 back in EQUITY, which is in reality Unrestricted Net Assets. But you're also reducing the overall expense amount instead of leaving it to be shown as money spent, which it wasn't.


However, are you crossing Accounting Funds here?? I see that you're spending funds from a school fund, which also means that you should be accessing a school fund checking account in addition to the General Fund ?

I guess the part that is confusing is that you keep saying a liability account. The cards are not actually a credit card. We are not given a "credit line" for it. We go to one gas station and fill up as needed and they bill us monthly for it based on usage.

Its a liability to the church, a bill you have to pay. What you have is a CHARGE Card ... not a credit card. Regular American Express cards are like this (or used to be), you have to pay the entire amount when the bill comes in.

Using a liability account to track your purchases allows you to reconcile the bill with the charge receipts you should be getting in the office.

Its covered here: https://www.powerchurch.com/forum/viewt ... ard#p39498

and here: https://www.powerchurch.com/forum/viewt ... ard#p35057

[ngaham]

Ok. So I need to create a liability account and label it the name of the company ( I guess that would be easiest?). Then enter the transactions you stated?

[ngaham]

Ok. So I need to create a liability account and label it the name of the company ( I guess that would be easiest?). Then enter the transactions you stated?

I also need to void the AP transaction that I completed earlier. I assume I can void that check and then reissue it with the same check number?

[NeilZ]

Yes to all the above ...

when you get a receipt for the gasoline charge, you would enter it as a MANUAL CHECK.

For the Check number, you could enter GASCARD, instead of the Checking Account you would use the account number of the liability account for the CREDIT, and the expense account for the DEBIT.

When you get the bill from the Gasoline Supplier, on the invoice you would use the Checking account as the CREDIT, and the Liability Account as the DEBIT.

To clear the Discount, again you'd use a manual check, use the check number of GASDISC, and the Liability account as the DEBIT, and the expense account as the CREDIT.


After all that .. I still have one question, you show the use of GENERAL ACCOUNT, and the SCHOOL ACCOUNT. Are these two separate accounting funds?? If so, there are some adjustments you'll have to make.

[ngaham]

Yes to all the above ...

when you get a receipt for the gasoline charge, you would enter it as a MANUAL CHECK.

For the Check number, you could enter GASCARD, instead of the Checking Account you would use the account number of the liability account for the CREDIT, and the expense account for the DEBIT.

When you get the bill from the Gasoline Supplier, on the invoice you would use the Checking account as the CREDIT, and the Liability Account as the DEBIT.

To clear the Discount, again you'd use a manual check, use the check number of GASDISC, and the Liability account as the DEBIT, and the expense account as the CREDIT.


After all that .. I still have one question, you show the use of GENERAL ACCOUNT, and the SCHOOL ACCOUNT. Are these two separate accounting funds?? If so, there are some adjustments you'll have to make.

I'll have to check with the guys who use these cards, but I've never seen a receipt for this. I've only been doing this for a month though. Thanks again Neil

[NeilZ]

Yes to all the above ...

when you get a receipt for the gasoline charge, you would enter it as a MANUAL CHECK.

For the Check number, you could enter GASCARD, instead of the Checking Account you would use the account number of the liability account for the CREDIT, and the expense account for the DEBIT.

When you get the bill from the Gasoline Supplier, on the invoice you would use the Checking account as the CREDIT, and the Liability Account as the DEBIT.

To clear the Discount, again you'd use a manual check, use the check number of GASDISC, and the Liability account as the DEBIT, and the expense account as the CREDIT.


After all that .. I still have one question, you show the use of GENERAL ACCOUNT, and the SCHOOL ACCOUNT. Are these two separate accounting funds?? If so, there are some adjustments you'll have to make.

I'll have to check with the guys who use these cards, but I've never seen a receipt for this. I've only been doing this for a month though. Thanks again Neil

Ask them for a receipt ... its part of your audit trail, and they SHOULD be getting one from the gas pump or the gas station store.