Unrestricted to Restricted

[ngaham]

I looked on the forums and I read several posts that talk about this. I wanted to make sure that I do this correctly. The church voted to move $2000.00 from our Unrestricted Net Assets in the General Fund and restrict it for Soundbooth Improvements. They also voted to designate $1600.00 to repaint the outside of our building. My question is how do I move this correctly? I have read NOT to use the equity account established for the donor restriction (sound booth improvements). But, I keep thinking if I used the income account it will give a false report on the churches income. My thought is to DB 01-3110 and CR the equity account for the Soundbooth Improvments.

On the painting transaction, there is approximately $1500 sitting unrestricted in the building fund. I want to restrict that to "painting the building" and then move the difference ($1600- balance that was unrestricted in building fund. Estimated $60) from the 01-3110 account to the restricted account "Painting the building". My thought on this is to DB Unrestricted in building fund and CR Painting the building. Then, move the estimated $60 by moving it (with transfer accounts) from unrestricted in 01-3110 to unrestricted in the building fund. Then restricting it in the "paining the building".

Am I thinking of this correctly?

[NeilZ]

I looked on the forums and I read several posts that talk about this. I wanted to make sure that I do this correctly. The church voted to move $2000.00 from our Unrestricted Net Assets in the General Fund and restrict it for Soundbooth Improvements. They also voted to designate $1600.00 to repaint the outside of our building. My question is how do I move this correctly? I have read NOT to use the equity account established for the donor restriction (sound booth improvements). But, I keep thinking if I used the income account it will give a false report on the churches income. My thought is to DB 01-3110 and CR the equity account for the Soundbooth Improvments.

On the painting transaction, there is approximately $1500 sitting unrestricted in the building fund. I want to restrict that to "painting the building" and then move the difference ($1600- balance that was unrestricted in building fund. Estimated $60) from the 01-3110 account to the restricted account "Painting the building". My thought on this is to DB Unrestricted in building fund and CR Painting the building. Then, move the estimated $60 by moving it (with transfer accounts) from unrestricted in 01-3110 to unrestricted in the building fund. Then restricting it in the "paining the building".

Am I thinking of this correctly?

Again, I'm looking at this practically, I am not an accountant, so use a lot of salt with this advice.

Honestly ... unless there are other building projects going on, you're restricting the funds for the paint job just by moving it to the building fund. Donor Restricted funds are indeed used to insure that funds are only used for certain things, but when you have the money in an accounting fund outside of operations, and its only used for one purpose (in this case the building) there's no need to restrict it even further.

Normally, a building fund is used for two things. Building a new building, or the capital improvement of the building. Normal day-to-day type maintenance (replacement of sink washers, new flapper in a toilet, replace a wall switch) falls under Operations.

Now, about the soundbooth, I'm going to assume that falls under operations, in reality what you're doing is BUDGETING 2000.00 toward the sound booth. You can go overboard with too many 'restricted fund accounts'. Only restrict what you need to; in this case its coming out of operating and, I suspect, will be spent in the next month or two. My rule of thumb is: if the funds are going to be spent right away, there's no need to 'set aside' and restrict them. If the funds will be sitting for 4 to 6 months or longer; then yes, create a temporarily restricted account.

[ngaham]

We have a Building Improvement Fund. We use it for improvements and have over $10,000 set aside for projects. Projects like Carpet Replacement, Auditorium Chairs, etc. These sit for months, if not years.

Our church wants to see these items on the balance sheet as restricted funds. That's why I was going to set it up that way.

In terms of a transaction, am I on the right track?

[NeilZ]

We have a Building Improvement Fund. We use it for improvements and have over $10,000 set aside for projects. Projects like Carpet Replacement, Auditorium Chairs, etc. These sit for months, if not years.

Our church wants to see these items on the balance sheet as restricted funds. That's why I was going to set it up that way.

In terms of a transaction, am I on the right track?

Definitely ... move from unrestricted net assets as a DEBIT to temp restricted assets as a CREDIT. If there are contributions being accepted for this purpose, you setup a Contribution Fund that points to the temp restricted income account.

Again, do a backup of the accounting files using the Powerchurch utility so you can easily back out the change if it doesn't work correctly. This allows you to return back to the starting point without having to do a reversal.

[ngaham]

Ok. I was just nervous doing a transaction directly to the equity account.

[NeilZ]

Ok. I was just nervous doing a transaction directly to the equity account.

This is one of the FEW times its permitted and necessary.