Tales From Tech 2 - Issue: 31b

Okay, it's tomorrow or the day after (or yesterday or two weeks ago).

Now I want to describe what the accounting entries look like when you receive restricted monies and what happens when you use them. Please don't worry if this doesn't make sense right away. I've been looking at it for a while now and it's just now as clear as mud.

To get a better understanding, let's take a simple example and work through it. Let's say we have a "Flowers for the Altar" donor restriction.

As mentioned before, when you add this restriction under Maintain List of Donor Restrictions in Fund Accounting, the program will let you add the accounts you need or you can choose them from accounts that already exist.

For the following example and the subsequent section, we'll use the following accounts pulled from one of the sample Chart of Accounts I've created inside my head (yeah, right):
01-1110-000 - Checking Account

01-3110-000 - Unrestricted Equity Account

01-3210-101 - Flowers for the Altar Restricted Equity Account

01-4210-101 - Flowers for the Altar Income Account

01-4810-101 - Flowers for the Altar Release Account

01-4999-000 - Released from Restrictions Account

01-6465-000 - Flowers Expense Account

The three accounts that are unique to our "Flowers for the Altar" donor restriction are the 3210-101, 4210-101 and 4810-101 accounts. (By the way, even though these three accounts have the same 3-digit sub-account number, you can use whatever numbers you want. You certainly don't have to use the same sub-account number (or even use sub-account numbers at all) for each of your donor restrictions. I just did it that way because I think it's pretty.)

WATCH THE MONEY AS IT FLOWS

When money is received, we debit the bank and credit the income account just as we would for unrestricted money, so here is our transaction:
CREDIT 01-4210-101 - Flowers for the Altar Income Account

DEBIT 01-1110-000 - Checking Account

Hey, that wasn't too bad, was it? It's the same as recording unrestricted contributions.

Now, let's say we're ready to go buy some flowers for the altar. We're going to credit the bank and debit the expense account just as we would if we were spending unrestricted money, but since we have to show that we are using restricted funds, we have to add an additional debit and credit line. Fortunately, after setting up the donor restriction, the program will do this for you with just a few clicks. Here is what the entry will look like:
CREDIT 01-1110-000 - Checking Account

DEBIT 01-6465-000 - Flowers Expense Account

DEBIT 01-4810-101 - Flowers for the Altar Release Account

CREDIT 01-4999-000 - Released from Restrictions Account

Keep in mind that this is just an example. If you are using restricted money to purchase a new asset, then you might not be debiting an expense account, you might be debiting an asset.

The point of all this is just that the entry for the money coming in is the same as it would be for unrestricted funds and the only thing different about the entry for the money going out is the additional debit and credit lines to release the restriction.

I PROMISE IT'S ALMOST OVER

Now I'm going to discuss the equity accounts listed above in our sample accounts. As you may have noticed, they weren't used in any of the transactions we entered.

Prior to Version 9, there was only one equity account (it was called the fund balance) and all your income and expense monies rolled into it when the year was closed. In Version 9, you can use the entire 3000 account number range for equity accounts.

Since each donor restriction will have its own equity account, finding how much money you have available for altar flowers, new cribs or whatever is a lot easier and you won't have to sub-account the bank or add a new Accounting Fund for every restriction.

FINALLY, FOR THE ACCOUNTANTS AMONG YOU

The end is almost here, but I did want to list each of the income, expense and release accounts from our above example and show which equity accounts they close to (remember, when you think close to, think update). Don't be worried about all this too much because PowerChurch Plus will keep it all straight for you (and you may have bigger problems by now, namely your eyesight), but if you're just dying to know about all the inner workings, read on (and if you pass out, don't say you weren't warned).

Here's how it all breaks down:
01-4210-101 - Flowers for the Altar Income Account closes to 01-3210-101 - Flowers for the Altar Restricted Equity Account

01-4810-101 - Flowers for the Altar Release Account closes to 01-3210-101 - Flowers for the Altar Restricted Equity Account

01-4999-000 - Released from Restrictions Account closes to 01-3110-000 - Unrestricted Equity Account

01-6465-000 - Flowers Expense Account closes to 01-3110-000 - Unrestricted Equity Account

So, the income and release accounts close to the restricted equity account and the released from restrictions and expense accounts close to the unrestricted equity account.

By the way, expense accounts ALWAYS close to unrestricted equity because you can only spend unrestricted money. This is what the extra debit and credit did in the example above when we decided to buy flowers. Those extra lines of distribution turn restricted money into unrestricted money when we use it.

Well, that's it for today's issue (and you just thought the madness would never end). Next week, we'll begin our 17 part series on nuclear fusion.