Transfer of Unrestricted $

[Greghc48]

Question -

I have a situation where the church wants to purchase some land initially using general funds, but establish a restricted fund line item in our building fund (temporary restrictions) to collect future donations to replenish the funds from general. The initial expense will be for $1000 as earnest money.

Right or wrong, I've done the following:
1) Transferred $1000 from general fund 01 checking to building fund 03 checking (we only have one checking account).
2) Paid the $1000 from a new expense line item for Land Purchase (linked to fund 03 checking). We did not set up a general budget line for this.
3) Set up a new contribution fund for land purchase, along with equity, release, income accounts.
4) I have not yet "released" the $1000 along with the expense payment - and as such, the sum of my release payments is $1000 lower than expenses.

The question I have (remember, I am no accountant).... is:

Should I have transferred the $1000 from general checking to building checking, or should that transfer be made via transfer of "equity" between the 2 account areas? Is there something weird about transferring unrestricted funds to a restricted line - then "releasing" them?

In other words, how can I really make the accounting entry of $1000.00 against the land purchase line item without some "equity" - other than money shown in the building checking account?

I sense something wrong in my accounting set up for this --- but just not sure about how to proceed. If there is a more simple / direct solution --- help!

Any advice would be welcome!

Thanks - Greg

[NeilZ]

Question -

I have a situation where the church wants to purchase some land initially using general funds, but establish a restricted fund line item in our building fund (temporary restrictions) to collect future donations to replenish the funds from general. The initial expense will be for $1000 as earnest money.

Right or wrong, I've done the following:
1) Transferred $1000 from general fund 01 checking to building fund 03 checking (we only have one checking account).
2) Paid the $1000 from a new expense line item for Land Purchase (linked to fund 03 checking). We did not set up a general budget line for this.
3) Set up a new contribution fund for land purchase, along with equity, release, income accounts.
4) I have not yet "released" the $1000 along with the expense payment - and as such, the sum of my release payments is $1000 lower than expenses.

The question I have (remember, I am no accountant).... is:

Should I have transferred the $1000 from general checking to building checking, or should that transfer be made via transfer of "equity" between the 2 account areas? Is there something weird about transferring unrestricted funds to a restricted line - then "releasing" them?

In other words, how can I really make the accounting entry of $1000.00 against the land purchase line item without some "equity" - other than money shown in the building checking account?

I sense something wrong in my accounting set up for this --- but just not sure about how to proceed. If there is a more simple / direct solution --- help!

Any advice would be welcome!

Thanks - Greg

Hi Greg ..

First off .. check the 03 fund's Unrestricted Net Assets account (defaults to 03-3110) to see if your transfer; and I'm assuming you used Transfer accounts, is showing.

If it is there, then I'm going to assume that the equity,release, income accounts are all Temp Restricted .. right ?? I'm also going to assume that you have NOT posted that check you wrote to pay for the land.

If all those assumptions are correct, then the next is easy:

Do a backup of the accounting files using the Powerchurch backup utility. Always do this if you're not quite sure if the way you're doing things is correct. This allows you to restore back to the previous account information, and gives you a baseline to work from. I always do this as it has saved my bacon a few times.

Create a transaction to DB 03-3110 and CR 03-3211 (temp restricted equity) for 1000. This puts the funds under restriction. Now you can release the 1000 from the temp restricted account, and post this. Unless those funds are moved, you really have nothing to release as they're already in Unrestricted Net Assets.

Now you can go to the invoice and release the restricted funds.

That's it .. you're done.

I must also say that I'm no accountant, but have learned through trial and error, and that a backup is your friend. That said, I have done this exact same thing, and it correctly reflects the transfer and the subsequent transactions against the second fund.

[Greghc48]

Thanks Neil. I'll give it a go and confirm it worked. After doing this, I now wish we would have just completed the purchase using general funds -- where we have the money anyway..!

Thx again for your advice. Backups are indeed our friends...

Greg

[NeilZ]

Thanks Neil. I'll give it a go and confirm it worked. After doing this, I now wish we would have just completed the purchase using general funds -- where we have the money anyway..!

Thx again for your advice. Backups are indeed our friends...

Greg

Yeah ... seems convoluted since the funds are initially coming from the general funds anyway.

[Greghc48]

Well Neil,

I continued to rethink this approach - and decided to go back to one of my early backups and changed how we handled this.

I just added a new expense line on my general fund to make the payment (land purchase expenses) from general checking, then made a command decision to increase the general budget by the overall land purchase - given that the church decided to use general funds (fund 01) for that purpose. Additionally, I then set up new designations in the building / capital improvement fund (03) to capture donor contributions for the purchase and future improvement projects on the land. As we collect donations to replenish the general fund for the land purchase, I'll periodically transfer from the fund 03 accounts to general fund 01.

Seems to be a lot cleaner than my convoluted way at first --- although I will keep your suggestion in my file in case I ever need to do that kind of transfer in the future!

Thanks again for your advice.

Greg

[NeilZ]

Good idea ... as I said I agree with you moving from 01 to 03, then purchasing from 03, was overkill. Since you have the church OK to use General Funds to buy, just doing it from 01, and then replenishing from 03 is easier, and shows a logical audit trail.

[Greghc48]

Neil - You are definitely right -

Thanks again for all the help.

Greg