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Balances forward of unused cash advances from previous year

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Balances forward of unused cash advances from previous year

Anita Graves-2
Dear All GC friends,

In the previous financial year, there were some funds advanced to two different persons for two different expense categories that appear in the account tree of that year.  In both of these accounts, there are now expenses to record to use up those cash advances, and I have the same accounts in this year’s account tree.

I do not know how to account for these unusued balances that carry over to this new year and to record the expenses in this new year to zero out the balances of the cash advances.  Are they to be confused with the equity account?  Balances forward???  Are they child accounts to some parent accounts?  

Thanks for your help….

Anita

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Re: Balances forward of unused cash advances from previous year

Maf. King
Hi Anita.

I think I would record them at start of year in an asset account - something
like Assets:AdvancePaymentsMade.  Then as you "use up" the pre paid expense,
transfer between Expenses:widgets and A:AdvPay so that the asset tends to
zero.

This presumes that if the expense didn't really happen, you'd be entitled to a
refund of the payment, and that any tax treatment is expecting you to claim
for the expense as it happens, not when you paid last year (ie not accrual
basis).

It also presumes that you have checked your local laws and practices for any
specific guidance, esp. in the case of business accounting.


IANAA etc.
Maf.


On Thursday, 18 May 2017 12:16:44 BST Anita Graves wrote:

> Dear All GC friends,
>
> In the previous financial year, there were some funds advanced to two
> different persons for two different expense categories that appear in the
> account tree of that year.  In both of these accounts, there are now
> expenses to record to use up those cash advances, and I have the same
> accounts in this year’s account tree.
>
> I do not know how to account for these unusued balances that carry over to
> this new year and to record the expenses in this new year to zero out the
> balances of the cash advances.  Are they to be confused with the equity
> account?  Balances forward???  Are they child accounts to some parent
> accounts?
>
> Thanks for your help….
>
> Anita




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Re: Balances forward of unused cash advances from previous year

Maf. King
On Thursday, 18 May 2017 13:07:07 BST Anita Graves wrote:

>
> What is a widget?
>

A generic term for raw materials that one might buy to incorporate into a
finished product.  I have no idea what your expenses are - so a generic term
seemed appropriate.

as in "this gadget uses a new design of widget to improve the efficiency of the
sproket to grommet conversion ratio"

Also, AFAIK, first commonly used to refer to the little bit of plastic invented
in the 80s to make Draught Guinness Beer in cans taste more-or-less like it
does from the pump in the pub.

Yes, I know Guinness is Stout not "just" beer.  Flames -> /dev/warm-the-mash

HTH,
Maf.

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Handling religious organization 'earmarked' funds and in-kind contributions

Anita Graves-2
In reply to this post by Anita Graves-2
Yes, you are right…I forgot to cc the list and I will do so by forwarding our exchange of emails to the list and ask Mike Novak to take a look at my questions.

By the way, we have a cultural issue:  You apparently are British, and I am American, so that’s why I didn’t get the ‘widget’.

Thanks for your help!

Anita

> On 18 May 2017, at 5:46 PM, Maf. King <[hidden email]> wrote:
>
> Hi Anita.
>
> There are others on the list who are more familiar with Church & charity
> accounting and earmarked donations.  (Mike Novak springs to mind), which is
> precisely why replies should be kept on-list.
>
> This sort of thing has come up before.
>
> I think so.
>
> The asset accounts would probably be best as sub-accounts of your bank, if all
> the "reserved" funds are held within the same physical bank account(s)
>
> So
>
> Asset:Bank:Reserved:Project1
> Asset:Bank:Reserved:Project2
> etc.
>
> (when you reconcile, check the "include sub-accounts" box)
>
> Then as you close the books (I think you said you had closed the books &
> started a new file), just carry the balances of each account forward and make
> the expense payments from thos reserved "pots" as needed.
>
> Should work.
>
> Cheers,
> Maf.
>
>
> On Thursday, 18 May 2017 15:35:16 BST you wrote:
>> Well, let’s begin all over because I am getting the idea that another
>> question I have is linked to this same one we have been talking about:
>>
>> I am the treasurer for a religious organization and we have some funds that
>> are ‘earmarked’.  That’s what we call them.  And that means that people
>> contribute funds for a specific purpose and that has to be somehow shown
>> against our assets so that those funds which are earmarked cannot be spent
>> for anything else.
>>
>> Therefore, I am trying to be insightful here and if I understand the
>> principle you evoke, I could open Asset subaccounts (child accounts) for
>> each of the individual earmarked funds and treat them in the same way by
>> expending them into the expense accounts that are related.
>>
>> And, in the case of funds that are carried over from one GC year to the
>> next, the balances in the asset subaccounts that have not yet been
>> expended, could be then entered in the new year’s asset subaccount as a
>> balance forward, and spent against the corresponding expense account.
>>
>> Please tell me if this is the same thing basically as my previous question
>> in which the expense is ‘prepaid’ as you say….
>>> On 18 May 2017, at 4:58 PM, Maf. King <[hidden email]> wrote:
>>>
>>> Hi Anita.
>>>
>>> I guess widget is english slang - maybe this will help:
>>> https://www.merriam-webster.com/dictionary/widget
>>>
>>> But forget widgets.  Henceforth, I'll assume that your pre-paid expense is
>>> for curtains.  Maybe it is macadamia nuts. It really doesn't matter!
>>>
>>> When the money left you bank last year, you book a transaction into
>>> Assets:PrePaymentToAliceForCurtains - so the bank balance goes down by
>>> £600
>>> and there is a matching increase in that asset account.
>>>
>>> When Alice sends the new curtains, you transfer the money from the Asset
>>> to
>>> Expense:Curtains, such that the asset goes to zero.
>>>
>>> hope that clarifies.
>>> Maf
>>>
>>> On Thursday, 18 May 2017 14:32:29 BST Anita Graves wrote:
>>>> Maf., if you could explain in more simple terms.
>>>>
>>>> Create balance forward in Asset subaccount
>>>>
>>>> Release the funds in expense account
>>>>
>>>> Do I have that correctly?  I have still no idea what you mean by a
>>>> widget.
>>>> But I need your help still.  Thanks so much.
>
>
> --
> Maf. King
> PGP Key fingerprint = 8D68 A91F 733B 2C1F 43B7  2B7C E591 E8E1 0DE7 C542
>
>
>

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Re: Balances forward of unused cash advances from previous year

Anita Graves-2
In reply to this post by Anita Graves-2
Maf,

Exactly—the bank shows our actual lump asset, but we care about the movement of these ‘earmarked’ funds and keep them in our reports, so we know at a glance how much spendable money in the bank we actually have, as opposed to what the bank statment gives as our balance.

Anita

> On 18 May 2017, at 5:49 PM, Maf. King <[hidden email]> wrote:
>
> On Thursday, 18 May 2017 15:39:59 BST you wrote:
>> Maf, I forgot to mention an important thing:  I am not moving money from the
>> bank, I am keeping it in the GC account tree along with cash, current,
>> savings accounts, so one would only know about these funds that are set
>> aside by looking at the GC accounts, not by looking at the bank statement.
>> It initially comes in as a contribution, and so I would put the
>> contribution in the asset subaccount, as an earmarked account, and then
>> spend that balance down to zero in the expense account.  Is that right?
>>
>
> Yes.  your GC bank account can have sub-accounts - virtual "pots" of money
> that only show up if you look at GC.   The bank thinks you have 1 "big"
> account, you think in terms of several mini accounts within the main bank
> account that keep your reserved totals easy to find...
>
> Maf.
>

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Re: Balances forward of unused cash advances from previous year

John Ralls-2
In reply to this post by Maf. King

> On May 18, 2017, at 5:39 AM, Maf. King <[hidden email]> wrote:
>
> On Thursday, 18 May 2017 13:07:07 BST Anita Graves wrote:
>
>>
>> What is a widget?
>>
>
> A generic term for raw materials that one might buy to incorporate into a
> finished product.  I have no idea what your expenses are - so a generic term
> seemed appropriate.
>
> as in "this gadget uses a new design of widget to improve the efficiency of the
> sproket to grommet conversion ratio"
>
> Also, AFAIK, first commonly used to refer to the little bit of plastic invented
> in the 80s to make Draught Guinness Beer in cans taste more-or-less like it
> does from the pump in the pub.
>
> Yes, I know Guinness is Stout not "just" beer.  Flames -> /dev/warm-the-mash
>

Just for fun, I'll point out that "gadgets" and "widgets" are generic but "sprocket" (the toothed wheels on your bicycle that engage the chain) and "grommet" (a fitting that goes around the edge of a hole either to prevent chafing or to reinforce the hole) are real things. Converting one to the other would be an interesting project. ;-)

http://www.dictionary.com/browse/widget <http://www.dictionary.com/browse/widget> says that the word first appeared in the 1920s.

Regards,
John Ralls
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How to post transactions re 'earmarked' contributions, and how to post in-kind contributions

Anita Graves-2
In reply to this post by Anita Graves-2
Dear All,

I am the treasurer for a religious organization and we have contributions coming in that are earmarked for a certain purpose.  I propose to enter these as separate Asset child accounts and then spend them in the corresponding expense account.  Do I have that right?

What do I do with ‘in-kind’ contributions?  No cash changes hands but it is the same difference, so do I debit the cash income account and credit the expense account?

Thanks for helping, everyone.

Anita

>
> Exactly—the bank shows our actual lump asset, but we care about the movement of these ‘earmarked’ funds and keep them in our reports, so we know at a glance how much spendable money in the bank we actually have, as opposed to what the bank statment gives as our balance.
>
> Anita
>
>> On 18 May 2017, at 5:49 PM, Maf. King <[hidden email]> wrote:
>>
>> On Thursday, 18 May 2017 15:39:59 BST you wrote:
>>> Maf, I forgot to mention an important thing:  I am not moving money from the
>>> bank, I am keeping it in the GC account tree along with cash, current,
>>> savings accounts, so one would only know about these funds that are set
>>> aside by looking at the GC accounts, not by looking at the bank statement.
>>> It initially comes in as a contribution, and so I would put the
>>> contribution in the asset subaccount, as an earmarked account, and then
>>> spend that balance down to zero in the expense account.  Is that right?
>>>
>>
>> Yes.  your GC bank account can have sub-accounts - virtual "pots" of money
>> that only show up if you look at GC.   The bank thinks you have 1 "big"
>> account, you think in terms of several mini accounts within the main bank
>> account that keep your reserved totals easy to find...
>>
>> Maf.
>>
>
> _______________________________________________
> gnucash-user mailing list
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> https://lists.gnucash.org/mailman/listinfo/gnucash-user
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> Please remember to CC this list on all your replies.
> You can do this by using Reply-To-List or Reply-All.

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Re: Balances forward of unused cash advances from previous year

Adrien Monteleone
In reply to this post by Maf. King
Speaking of Irish stout I plan to be brewing some this weekend, perhaps with cherries. We might do a porter instead though, still deciding on recipes.

Stay thirsty,

Adrien

> On May 18, 2017, at 7:39 AM, Maf. King <[hidden email]> wrote:
>
> On Thursday, 18 May 2017 13:07:07 BST Anita Graves wrote:
>
>>
>> What is a widget?
>>
>
> A generic term for raw materials that one might buy to incorporate into a
> finished product.  I have no idea what your expenses are - so a generic term
> seemed appropriate.
>
> as in "this gadget uses a new design of widget to improve the efficiency of the
> sproket to grommet conversion ratio"
>
> Also, AFAIK, first commonly used to refer to the little bit of plastic invented
> in the 80s to make Draught Guinness Beer in cans taste more-or-less like it
> does from the pump in the pub.
>
> Yes, I know Guinness is Stout not "just" beer.  Flames -> /dev/warm-the-mash
>
> HTH,
> Maf.
>
> _______________________________________________
> gnucash-user mailing list
> [hidden email]
> https://lists.gnucash.org/mailman/listinfo/gnucash-user
> -----
> Please remember to CC this list on all your replies.
> You can do this by using Reply-To-List or Reply-All.

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Re: How to post transactions re 'earmarked' contributions, and how to post in-kind contributions

Adrien Monteleone
In reply to this post by Anita Graves-2
I’d double check with a CPA or legal advisor concerning the ‘earmarking’ of donations if your organization takes them as tax-deductible in the U.S.

I could be wrong, and I may only be thinking of certain types of non-profits, but my understanding is that tax-deductible donations to non-profits cannot be earmarked by the donor.

If that’s the case, it would save you some accounting work.

Regards,

Adrien

> On May 18, 2017, at 10:03 AM, Anita Graves <[hidden email]> wrote:
>
> Dear All,
>
> I am the treasurer for a religious organization and we have contributions coming in that are earmarked for a certain purpose.  I propose to enter these as separate Asset child accounts and then spend them in the corresponding expense account.  Do I have that right?
>
> What do I do with ‘in-kind’ contributions?  No cash changes hands but it is the same difference, so do I debit the cash income account and credit the expense account?
>
> Thanks for helping, everyone.
>
> Anita
>
>>
>> Exactly—the bank shows our actual lump asset, but we care about the movement of these ‘earmarked’ funds and keep them in our reports, so we know at a glance how much spendable money in the bank we actually have, as opposed to what the bank statment gives as our balance.
>>
>> Anita
>>
>>> On 18 May 2017, at 5:49 PM, Maf. King <[hidden email]> wrote:
>>>
>>> On Thursday, 18 May 2017 15:39:59 BST you wrote:
>>>> Maf, I forgot to mention an important thing:  I am not moving money from the
>>>> bank, I am keeping it in the GC account tree along with cash, current,
>>>> savings accounts, so one would only know about these funds that are set
>>>> aside by looking at the GC accounts, not by looking at the bank statement.
>>>> It initially comes in as a contribution, and so I would put the
>>>> contribution in the asset subaccount, as an earmarked account, and then
>>>> spend that balance down to zero in the expense account.  Is that right?
>>>>
>>>
>>> Yes.  your GC bank account can have sub-accounts - virtual "pots" of money
>>> that only show up if you look at GC.   The bank thinks you have 1 "big"
>>> account, you think in terms of several mini accounts within the main bank
>>> account that keep your reserved totals easy to find...
>>>
>>> Maf.
>>>
>>
>> _______________________________________________
>> gnucash-user mailing list
>> [hidden email]
>> https://lists.gnucash.org/mailman/listinfo/gnucash-user
>> -----
>> Please remember to CC this list on all your replies.
>> You can do this by using Reply-To-List or Reply-All.
>
> _______________________________________________
> gnucash-user mailing list
> [hidden email]
> https://lists.gnucash.org/mailman/listinfo/gnucash-user
> -----
> Please remember to CC this list on all your replies.
> You can do this by using Reply-To-List or Reply-All.

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Re: How to post transactions re 'earmarked' contributions, and how to post in-kind contributions

Anita Graves-2
Thank you, Adrien.

I live in Cyprus.  We probably are a taxable entity, and that is currently being investigated, but we are a religious corporation without share capital.  Our accountants have never mentioned anything about these ‘earmarked’ contributions, but they are not sinister money laundering income, and here are examples of what they are:

1)  Contribution earmarked to offset electricity expenses in the meeting place

2)  Contribution earmarked for the fencing of our property where our meeting place is located

3)  Contribution earmarked for repairs and maintenance of the building where we meet

4)  Contribution earmarked for the purchase of furniture for our meeting place

5)  Contribution earmarked for our religious community in another country to build a house of worship

6)  Contribution earmarked for our Faith’s international fund in another country

We view these as restricted funds.  They cannot be spent for anything except for the donor-designated purpose, except with the permission of the donor.  The treasurer has to account for how these funds are drawn down when expenses are made accordingly, and must always have the information that the balance in our sole bank account has to be considered as not spendable income, depending on how much of our assets contain these ‘earmarked’ funds.

We are a small corporation, members of an international Faith organization, and we very carefully monitor the nature of our voluntary contributions.  We are a small religious population (about 200 persons) on a small island in the Mediterranean Sea.

I hope this is clarification, but if you suspect we have a problem, please give me your advice.  We have a professional accounting firm that is preparing our audit for our past financial year now.  This is their first audit as they were recently engaged by us for their services.  We are a non-profit corporation, but not a charitable entity.  I have no idea about the tax deductibility of our contributions, but they rarely exceed Euro 2000 (and those usually come from the UK or the USA), and are mostly in the very low denominations up to Euro 100 - 200, so we probably have never met this question….  I guess we need to have legal advice? Our previous accountant/audit firm has never mentioned these things to us and we have existed as a corporate body since 1959.  

Please comment again,

Anita

> On 19 May 2017, at 10:25 AM, Adrien Monteleone <[hidden email]> wrote:
>
> I’d double check with a CPA or legal advisor concerning the ‘earmarking’ of donations if your organization takes them as tax-deductible in the U.S.
>
> I could be wrong, and I may only be thinking of certain types of non-profits, but my understanding is that tax-deductible donations to non-profits cannot be earmarked by the donor.
>
> If that’s the case, it would save you some accounting work.
>
> Regards,
>
> Adrien
>
>> On May 18, 2017, at 10:03 AM, Anita Graves <[hidden email]> wrote:
>>
>> Dear All,
>>
>> I am the treasurer for a religious organization and we have contributions coming in that are earmarked for a certain purpose.  I propose to enter these as separate Asset child accounts and then spend them in the corresponding expense account.  Do I have that right?
>>
>> What do I do with ‘in-kind’ contributions?  No cash changes hands but it is the same difference, so do I debit the cash income account and credit the expense account?
>>
>> Thanks for helping, everyone.
>>
>> Anita
>>
>>>
>>> Exactly—the bank shows our actual lump asset, but we care about the movement of these ‘earmarked’ funds and keep them in our reports, so we know at a glance how much spendable money in the bank we actually have, as opposed to what the bank statment gives as our balance.
>>>
>>> Anita
>>>
>>>> On 18 May 2017, at 5:49 PM, Maf. King <[hidden email]> wrote:
>>>>
>>>> On Thursday, 18 May 2017 15:39:59 BST you wrote:
>>>>> Maf, I forgot to mention an important thing:  I am not moving money from the
>>>>> bank, I am keeping it in the GC account tree along with cash, current,
>>>>> savings accounts, so one would only know about these funds that are set
>>>>> aside by looking at the GC accounts, not by looking at the bank statement.
>>>>> It initially comes in as a contribution, and so I would put the
>>>>> contribution in the asset subaccount, as an earmarked account, and then
>>>>> spend that balance down to zero in the expense account.  Is that right?
>>>>>
>>>>
>>>> Yes.  your GC bank account can have sub-accounts - virtual "pots" of money
>>>> that only show up if you look at GC.   The bank thinks you have 1 "big"
>>>> account, you think in terms of several mini accounts within the main bank
>>>> account that keep your reserved totals easy to find...
>>>>
>>>> Maf.
>>>>
>>>
>>> _______________________________________________
>>> gnucash-user mailing list
>>> [hidden email]
>>> https://lists.gnucash.org/mailman/listinfo/gnucash-user
>>> -----
>>> Please remember to CC this list on all your replies.
>>> You can do this by using Reply-To-List or Reply-All.
>>
>> _______________________________________________
>> gnucash-user mailing list
>> [hidden email]
>> https://lists.gnucash.org/mailman/listinfo/gnucash-user
>> -----
>> Please remember to CC this list on all your replies.
>> You can do this by using Reply-To-List or Reply-All.
>
> _______________________________________________
> gnucash-user mailing list
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> https://lists.gnucash.org/mailman/listinfo/gnucash-user
> -----
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> You can do this by using Reply-To-List or Reply-All.

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Re: How to post transactions re 'earmarked' contributions, and how to post in-kind contributions

Adrien Monteleone
Sorry Anita, I thought I saw in another post of yours that you said your were in the U.S. I guess I was confused.

By all means, go with your professional accounting advice, not me.

And I never meant to suggest there was anything improper with the funds, just that in some jurisdictions and in some cases, donors can't designate how those funds are spent. Each jurisdiction will be different of course.

Best of Luck sorting this out and Regards,

Adrien


On May 19, 2017, at 3:41 AM, Anita Graves wrote:

> Thank you, Adrien.
>
> I live in Cyprus.  We probably are a taxable entity, and that is currently being investigated, but we are a religious corporation without share capital.  Our accountants have never mentioned anything about these ‘earmarked’ contributions, but they are not sinister money laundering income, and here are examples of what they are:
>
> 1)  Contribution earmarked to offset electricity expenses in the meeting place
>
> 2)  Contribution earmarked for the fencing of our property where our meeting place is located
>
> 3)  Contribution earmarked for repairs and maintenance of the building where we meet
>
> 4)  Contribution earmarked for the purchase of furniture for our meeting place
>
> 5)  Contribution earmarked for our religious community in another country to build a house of worship
>
> 6)  Contribution earmarked for our Faith’s international fund in another country
>
> We view these as restricted funds.  They cannot be spent for anything except for the donor-designated purpose, except with the permission of the donor.  The treasurer has to account for how these funds are drawn down when expenses are made accordingly, and must always have the information that the balance in our sole bank account has to be considered as not spendable income, depending on how much of our assets contain these ‘earmarked’ funds.
>
> We are a small corporation, members of an international Faith organization, and we very carefully monitor the nature of our voluntary contributions.  We are a small religious population (about 200 persons) on a small island in the Mediterranean Sea.
>
> I hope this is clarification, but if you suspect we have a problem, please give me your advice.  We have a professional accounting firm that is preparing our audit for our past financial year now.  This is their first audit as they were recently engaged by us for their services.  We are a non-profit corporation, but not a charitable entity.  I have no idea about the tax deductibility of our contributions, but they rarely exceed Euro 2000 (and those usually come from the UK or the USA), and are mostly in the very low denominations up to Euro 100 - 200, so we probably have never met this question….  I guess we need to have legal advice? Our previous accountant/audit firm has never mentioned these things to us and we have existed as a corporate body since 1959.  
>
> Please comment again,
>
> Anita
>
>> On 19 May 2017, at 10:25 AM, Adrien Monteleone <[hidden email]> wrote:
>>
>> I’d double check with a CPA or legal advisor concerning the ‘earmarking’ of donations if your organization takes them as tax-deductible in the U.S.
>>
>> I could be wrong, and I may only be thinking of certain types of non-profits, but my understanding is that tax-deductible donations to non-profits cannot be earmarked by the donor.
>>
>> If that’s the case, it would save you some accounting work.
>>
>> Regards,
>>
>> Adrien
>>
>>> On May 18, 2017, at 10:03 AM, Anita Graves <[hidden email]> wrote:
>>>
>>> Dear All,
>>>
>>> I am the treasurer for a religious organization and we have contributions coming in that are earmarked for a certain purpose.  I propose to enter these as separate Asset child accounts and then spend them in the corresponding expense account.  Do I have that right?
>>>
>>> What do I do with ‘in-kind’ contributions?  No cash changes hands but it is the same difference, so do I debit the cash income account and credit the expense account?
>>>
>>> Thanks for helping, everyone.
>>>
>>> Anita
>>>
>>>>
>>>> Exactly—the bank shows our actual lump asset, but we care about the movement of these ‘earmarked’ funds and keep them in our reports, so we know at a glance how much spendable money in the bank we actually have, as opposed to what the bank statment gives as our balance.
>>>>
>>>> Anita
>>>>
>>>>> On 18 May 2017, at 5:49 PM, Maf. King <[hidden email]> wrote:
>>>>>
>>>>> On Thursday, 18 May 2017 15:39:59 BST you wrote:
>>>>>> Maf, I forgot to mention an important thing:  I am not moving money from the
>>>>>> bank, I am keeping it in the GC account tree along with cash, current,
>>>>>> savings accounts, so one would only know about these funds that are set
>>>>>> aside by looking at the GC accounts, not by looking at the bank statement.
>>>>>> It initially comes in as a contribution, and so I would put the
>>>>>> contribution in the asset subaccount, as an earmarked account, and then
>>>>>> spend that balance down to zero in the expense account.  Is that right?
>>>>>>
>>>>>
>>>>> Yes.  your GC bank account can have sub-accounts - virtual "pots" of money
>>>>> that only show up if you look at GC.   The bank thinks you have 1 "big"
>>>>> account, you think in terms of several mini accounts within the main bank
>>>>> account that keep your reserved totals easy to find...
>>>>>
>>>>> Maf.
>>>>>
>>>>
>>>> _______________________________________________
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Re: How to post transactions re 'earmarked' contributions, and how to post in-kind contributions

Dale Alspach-2
In reply to this post by Anita Graves-2
Anita,

I know nothing of the situation in Cypress, but I have some experience
with non-profit accounting in the U.S. My answers may at least suggest
what might be done in your case.

For earmarked or what are called restricted funds what you suggested is
adequate if the donor is not expecting a detailed report of how funds
are spent and the funds are not being invested. In some cases it may be
necessary to actually have separate bank accounts (not just separate
gnucash accounts) so that funds are not comingled. This is something to
discuss with your local experts.

For in-kind donations the non-profit I work with splits these in a few
ways and, as donations, accounts for them separately from cash. We do
functional accounting and must report to the IRS. The IRS views
donations of things differently from donations of services. Another
problem in the U.S. is the value of an in-kind donation. As much as
possible we avoid supplying donors with a valuation. We only say what
was donated.

For our internal accounting purposes we value in-kind donations in a
practical manner. Things that are donated that are meant to be sold are
only valued at the time of sale and the value is the revenue from the
sale. The only exception to this is for things (for example land) that
may be held for an extended length of time before being sold.

For things that are meant to be used by the organization or donations of
services, we value by what we would have paid for a functionally
equivalent item or service. For example someone might donate 1000 square
feet of flooring that would cost $5 per square foot but we would
normally buy flooring that costs $3 per square foot. (Note the donor may
tell the IRS that $5000 of flooring was donated; that is between the IRS
and the donor. ) The donation is valued in our books at $3 per square
foot. When the flooring is actually installed it is expensed as though
we had paid cash, that is, the in-kind asset account is credited and the
appropriate expense account is debited.

To be a little more specific suppose there are accounts

 Donations of Materials (income)
 Construction Materials Inventory (asset)
 Cost of Construction (expense)

Donor gives 1000 square feet of flooring:
Credit $3000 ($3 x 1000) Donations of Materials; Debit $3000
Construction Materials

Next month the crew uses 400 square feet of the flooring:
Credit $1200 Construction Materials; Debit $1200 Cost of Construction

Hope this helps,

Dale

On 05/19/2017 03:41 AM, Anita Graves wrote:

> Thank you, Adrien.
>
> I live in Cyprus.  We probably are a taxable entity, and that is currently being investigated, but we are a religious corporation without share capital.  Our accountants have never mentioned anything about these ‘earmarked’ contributions, but they are not sinister money laundering income, and here are examples of what they are:
>
> 1)  Contribution earmarked to offset electricity expenses in the meeting place
>
> 2)  Contribution earmarked for the fencing of our property where our meeting place is located
>
> 3)  Contribution earmarked for repairs and maintenance of the building where we meet
>
> 4)  Contribution earmarked for the purchase of furniture for our meeting place
>
> 5)  Contribution earmarked for our religious community in another country to build a house of worship
>
> 6)  Contribution earmarked for our Faith’s international fund in another country
>
> We view these as restricted funds.  They cannot be spent for anything except for the donor-designated purpose, except with the permission of the donor.  The treasurer has to account for how these funds are drawn down when expenses are made accordingly, and must always have the information that the balance in our sole bank account has to be considered as not spendable income, depending on how much of our assets contain these ‘earmarked’ funds.
>
> We are a small corporation, members of an international Faith organization, and we very carefully monitor the nature of our voluntary contributions.  We are a small religious population (about 200 persons) on a small island in the Mediterranean Sea.
>
> I hope this is clarification, but if you suspect we have a problem, please give me your advice.  We have a professional accounting firm that is preparing our audit for our past financial year now.  This is their first audit as they were recently engaged by us for their services.  We are a non-profit corporation, but not a charitable entity.  I have no idea about the tax deductibility of our contributions, but they rarely exceed Euro 2000 (and those usually come from the UK or the USA), and are mostly in the very low denominations up to Euro 100 - 200, so we probably have never met this question….  I guess we need to have legal advice? Our previous accountant/audit firm has never mentioned these things to us and we have existed as a corporate body since 1959.  
>
> Please comment again,
>
> Anita
>
>> On 19 May 2017, at 10:25 AM, Adrien Monteleone <[hidden email]> wrote:
>>
>> I’d double check with a CPA or legal advisor concerning the ‘earmarking’ of donations if your organization takes them as tax-deductible in the U.S.
>>
>> I could be wrong, and I may only be thinking of certain types of non-profits, but my understanding is that tax-deductible donations to non-profits cannot be earmarked by the donor.
>>
>> If that’s the case, it would save you some accounting work.
>>
>> Regards,
>>
>> Adrien
>>
>>> On May 18, 2017, at 10:03 AM, Anita Graves <[hidden email]> wrote:
>>>
>>> Dear All,
>>>
>>> I am the treasurer for a religious organization and we have contributions coming in that are earmarked for a certain purpose.  I propose to enter these as separate Asset child accounts and then spend them in the corresponding expense account.  Do I have that right?
>>>
>>> What do I do with ‘in-kind’ contributions?  No cash changes hands but it is the same difference, so do I debit the cash income account and credit the expense account?
>>>
>>> Thanks for helping, everyone.
>>>
>>> Anita
>>>
>>>>
>>>> Exactly—the bank shows our actual lump asset, but we care about the movement of these ‘earmarked’ funds and keep them in our reports, so we know at a glance how much spendable money in the bank we actually have, as opposed to what the bank statment gives as our balance.
>>>>
>>>> Anita
>>>>
>>>>> On 18 May 2017, at 5:49 PM, Maf. King <[hidden email]> wrote:
>>>>>
>>>>> On Thursday, 18 May 2017 15:39:59 BST you wrote:
>>>>>> Maf, I forgot to mention an important thing:  I am not moving money from the
>>>>>> bank, I am keeping it in the GC account tree along with cash, current,
>>>>>> savings accounts, so one would only know about these funds that are set
>>>>>> aside by looking at the GC accounts, not by looking at the bank statement.
>>>>>> It initially comes in as a contribution, and so I would put the
>>>>>> contribution in the asset subaccount, as an earmarked account, and then
>>>>>> spend that balance down to zero in the expense account.  Is that right?
>>>>>>
>>>>>
>>>>> Yes.  your GC bank account can have sub-accounts - virtual "pots" of money
>>>>> that only show up if you look at GC.   The bank thinks you have 1 "big"
>>>>> account, you think in terms of several mini accounts within the main bank
>>>>> account that keep your reserved totals easy to find...
>>>>>
>>>>> Maf.
>>>>>
>>>>
>>>> _______________________________________________
>>>> gnucash-user mailing list
>>>> [hidden email]
>>>> https://lists.gnucash.org/mailman/listinfo/gnucash-user
>>>> -----
>>>> Please remember to CC this list on all your replies.
>>>> You can do this by using Reply-To-List or Reply-All.
>>>
>>> _______________________________________________
>>> gnucash-user mailing list
>>> [hidden email]
>>> https://lists.gnucash.org/mailman/listinfo/gnucash-user
>>> -----
>>> Please remember to CC this list on all your replies.
>>> You can do this by using Reply-To-List or Reply-All.
>>
>> _______________________________________________
>> gnucash-user mailing list
>> [hidden email]
>> https://lists.gnucash.org/mailman/listinfo/gnucash-user
>> -----
>> Please remember to CC this list on all your replies.
>> You can do this by using Reply-To-List or Reply-All.
>
> _______________________________________________
> gnucash-user mailing list
> [hidden email]
> https://lists.gnucash.org/mailman/listinfo/gnucash-user
> -----
> Please remember to CC this list on all your replies.
> You can do this by using Reply-To-List or Reply-All.
>
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