I am neither an accountant nor a bookkeeper. However, I participate in a tax exempt 501(c)(6) nonprofit organization that is considering changing the way we enter and present some of our accounting information. We have heard of another way of doing the bookkeeping than the way we now do it, and I am trying to get some thoughts and feedback on this. We do have an accountant and others to check with, but I am hoping to get any additional thoughts and input anyone can offer here.
One of the things our organization does is set up educational seminars and group meetings for our members as well as for the general public -- all of which relate to real estate investing.
Here are two examples of the kinds of program events we conduct:
One example would be a meeting that we set up to be held in a restaurant regarding a specific topic in real estate investing, and we charge members $15 each to attend which includes the meal provided by the restaurant. The restaurant charges us $15 per person so the meal cost is collected by us then turned over to the restaurant that same night. A few people per meeting get "comped" meaning the organization pays the meal fee at no cost to the attendee. Non-members can also attend and pay the same $15 for the meal plus a $10 admission fee.
A second example would be an all-day seminar that we set up that features an outside national speaker. We charge $90 per person and we pay for the room rental and all other expenses. The speaker gets a guaranteed minimum plus a percentage of the admission fees above the minimum. In addition, if the national speaker sells any additional educational packages (such as a 3-day seminar at $500 per person) we split those additional sales receipts with the speaker.
The way we do the books and accounting now is that we show everything we receive for each event as income to the organization, then we show payments to the restaurants plus any fees or sales commissions to the speakers as expenses. From that, we determine the net gain or loss from each event.
What has been proposed is that, in the first example above, the $15 per person would not be booked as income to the organization because, even though we collect it, it goes to the restaurant for the meals. In the second example, the sales of additional educational packages (i.e. $500 for a 3-day seminar) would not be reported as income to the organization because
50% of that goes to the national speaker and only 50% goes to the organization as income.The concept is supposed to be that, while the numbers all work out the same in the end, it is more correct to NOT show the meal fees or educational sales as organizational income (from which the costs and expenses would be deducted) because they are not really organizational income -- only the net gain is income.
Is this correct? Do nonprofits typically use either or both of these approaches?
Thanks.