Debiting an income account

On Tue, 21 Feb 2006 14:50:55 GMT, in alt.accounting Ken Davidson wrote in :

Some people create a contra account (maybe called Uncollected Offerings or something similar) to track these separately rather than just charge them back to the Offerings income account. The contra account still is subtracted from the Offerings before calculating expenses. Others just deduct it, since in cash basis accounting, if the money didn't really show up, it isn't counted. The bounced check fee, if any, would be an operating expense.

Of course you can credit an expense if it was improperly charged that that account.

Usually you make a correcting entry that reverses the original expense entry and then enters it properly. Many people in less formal arrangements will just Debit the correct account and Credit the account that had erroneously been charged.

"David Jensen" wrote

If you are using software like QB, you can just correct the orriginal transaction (a flaw I know, but you can do that). The mistake never shows up anywhere.

Excellent. Thanks very much for the quick reply.

One other item that's been nagging at me is reimbursements. Our previous treasurer loved to use stick miscellaneous offsetting income and expenses into catch-all reimbursement accounts. In my mind, doing so always skewed the budget numbers because it would always inflate both income and expenses.

I was reading about using liability accounts for pass-through monies. For example, if you collect money for a specific nonprofit organization that comes into the operating account and then goes right out again. It's a way of accounting for the money without affecting the income and expense report.

Is it proper to extend that to other functions such as money for a women's group dinner. The church is collecting the money and cutting a single check for the same amount simply as a convenience. In the past, the treasurer would put the incoming checks into a reimbursement income account and write the check out of a reimbursement expense account. I want to use a single liability account that accumulates the money as it comes in, and then is zeroed out when the final check is written. The running balance appears on the balance sheet, but it stays away from the day-to-day income and expense sheet.

Am I valid in my thinking? Thanks.

That is the proper way to handle it.

Correct.

Yes, it is not income and should not be treated as such. Money that is not revenue for your organization and will be paid to some other organization is a liability while the offsetting assets remain in your checking account. If you have some organizations that you routinely collect money for, set up a separate liability account such as Women's Group Dinners Payable for each one. If it's a rare event, then just put it into a miscellaneous liability account such as Group Events Payable. Use the names you like, but Payable is a very good last word in these liability account names.

Sheesh. I've been searching on Google for answers to these for the past week without much success, and in a matter of minutes, I get good information here. I think I'll stick around. :o)

Thanks very much again.

I love it! Quick Books mirrors real life. I know the Accountants out there will want to hang me for blasphemy or somesuch, but I am getting older and just want an easy fix. Rick

On Wed, 22 Feb 2006 19:42:11 -0800, in alt.accounting "Rick Shaw" wrote in :

You can do it in Peachtree as well -- and I did regularly -- but I had the audit tracking function on so anyone who cared could see that I was fixing errors without wasting time doing it the right way.

Beverly

Not always. A church I'm aware of has managed to save close to $90,000 over the years. They consider that money an emergency fund but are extremely reluctant to spend it on anything, including repairing the leaking roof. However, last year they had to dip into the savings because they were $2500 short on income over expenses.

These are not funds of the church that have restricted use, rather they are funds of other organizations being held for the moment by the church, so even in a fund accounting arrangement, these are still liabilities.

I think the question was about fund accounting, a specialized way of accounting for not-for-profit organizations. It is interesting to see what organizations consider critical for emergency funds. I've noticed that state legislatures consider it an emergency if they can't cut taxes.