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Fund Accounting

This topic has been well-discussed in several forums over the years, but I still don't have a clear understanding on a good way to do fund accounting (restrictied funds, designated funds) in Quickbooks Pro

2006. Comments are appreciated.

The Environment: Quickbooks Pro 2006, non-profit soccer club. We use Classes for the various programs within the club (adult, youth competitive, corporate, recreational, indoor), so we can determine the P&L for a particular program and try to avoid cross-subsidization. QB is meeting our needs.

We don't want to purchase other software, or get the Non-Profit version of QB, if this can be avoided.

We are not holding the Field Development Fund in a separate bank account. The only way we're keeping the money separate is through the financial records.

What my research indicates is that a segregated fund (in this case, our Field Development Fund) can be shown on the books in several manners (Liability or Equity Fund are the most common). I like the idea of an Equity Fund, since it is money that we have, that we are not obligated to pay (so it's not a good match to be a Liability accoun), but it is earmarked for a particular usage (so it should not be left in the Members Equity account).

So I am leaning towards setting up an Equity Account called "Field Development Fund". And at the end of the fiscal year I can put in a journal transaction that transfers the appropriate amount of money from "Member's Equity" into "Field Development Fund". This part is easy. Instead of $100,000 Member's Equity, I now have $10,000 in the FDF and $90K in Member's Equity.

Problems I see:

  1. How do I get money out of the Field Development Fund? Do I write a cheque against the Bank Account, and use "Field Development" as the CofA expense (so it shows as an expense in the current year), this reduces our assets (the bank account) and our Member's Equity, and then use a journal entry to transfer the appropriate amount to reduce the Field Development Fund to Member's Equity... meaning Member's Equity has held constant and the Field development fund has gone down? So, using all of this, the Balance Sheet works. If this is all I had to do then I think I'm OK.

Example: We spend $5K on fields. I write a cheque, expense category is "Field Development". All is well on the P&L. On the Balance sheet, the Assets are Ok (we have $5K less money. but the FDF is over-stated by $5K so I transfer $5K to Members Equity.

  1. When a player pays (let's say) 0 in their player registration, that is all counted as income for the current year. But only is available for Operating Costs, the other is earmarked for the Field Development Fund. Assume we lose money for the year - our actual Operating Cost is per player. The balance sheet will be fine (Member's Equity will decrease by per player after I transfer the per player to the Field Fund), but unless I record a transaction for the Field Development Fund involving Income&Expenses, the P&L will show 0 Income and expenses, and look like we made a profit, when in reality we had general income (with hived off to the Fund), and general expenses. How do I record this?

In a perfect world I think I would like to have, for each player (since the $10 never really flowed into the General Funds): a. Income - Player Fees Player Registration $90 To Field Fund $10 b. An expense of $10 per player to offset "To Field Fund" Income Account, to the Fields Equity Fund.

All comments and suggestions (and instructions) would be welcome. Thanks.

Reply to
jim.mantle
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I have limited non profit experiance but a friend of mine recently pointed me to this website:

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download the document listed towards the bottom of the page. It shows how to use QB 2004 for non profit organizations.

Reply to
Laura

Jim-We use regular QB for our church accounting. Under the equity section, we have our various "funds". When we pay an expense directly associated with one of the designated funds, we just code it to that fund account in the equity section. That amount never hits the P&L. Works very well.

Same for deposits - regular giving goes to the income & expense side. Gifts designated for particular fund go directly to the equity section for that fund. N Owen

Reply to
N Owen

Using this method there is no period report of income and expenses for the fund unless you analyze the fund equity account (then you have to do manually what QB is supposed to do).

I would set up the field development same as the others -a P & L Class then do a journal entry at the end of the period to transfer the surplus/deficit to the field equity account. Keep it simple.

Later...

David S>

David S>

Reply to
David Smith

Thanks for all the comments:

- Regarding the website, I downloaded the file but the examples are for a US company, and I have a Canadian version of Quickbooks (which refuses to load the US Company file).

- Classes are already in use for another dimension of our accounting, and so are unavailable for managing these funds.

What seems to work:

  1. Create an equity account for the Field Development Fund
  2. For the initial amounts (the carry-over from the pre-Quickbooks days), do a journal entry to transfer from Member's Equity (renamed from Opening Balance Equity) the appropriate amount. The money stays as equity, but now it is Restricted.
  3. For the player registration, split the 0 into for the registration fee plus for the field development fund (both accounts are subaccounts of "Player Registration Income" in the COA). I won't do this on each deposit, just do a journal entry to transfer from one income account to the other at a suitable point in time.
  4. At the conclusion of the fiscal year, do a journal entry between the expense "Field Development" to the Equity Account, so that the Fields Income for the year exactly matches the "Field Development Expense".

When everything is done: a. The Player Fees ($90) is matched against the rest of the expenses, and so we'll clearly know if we made or lost money on operations. b. The income and the expense for the Field Development portion of the player fee, and the Fields Development cost, will balance each out.

And so the P&L, and the Balance Sheet, will all work.

I still need to figure out how to spend money from the Restricted Fund on actual Field Development. I suspect this would either be:

i) As simple as using the Restricted Equity account as the expense for the Field Development - but then the expense of the field development won't show in the P&L, only in the fund accounting ii) Create a new Other Income Account called "Transfers from Field Fund", write the expense cheque against Other Expenses account called Field Development, and transfer the correct amount using a Journal Entry from the Equity account to the Other Income account.

Jim

Reply to
Jim Mantle

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