USING QUICKBOOKS TO RECORD RESTRICTED …

1 2011 Jones & Associates LLC, CPAs ( ) 1 USING QUICKBOOKS TO RECORD RESTRICTED TRANSACTIONS Recording Pledges Pledges are unconditional promises that a donor gives to your organization, which could include a promise for money over a period of time, a one-time gift or in-kind donations. When a pledge is recorded, contributions income is also recorded at the same time. In the accounting rules, once an unconditional promise is made, the pledge should be recorded as of the date the promise is made. For example, if a donor sends you a letter that declares that s/he is going to give you $5,000 for your next year s operations, you need to RECORD it as a pledge when the promise is made, NOT when it is received in the next year.

2 QUICKBOOKS tracks every Customer as a Job . That means you can code any revenue or expense item to a Customer and later produce a report for just that Job . This is useful if you have a particular grant, within a program (which is coded as a specific Class ), that needs to be accounted for separately. The restriction can be satisfied by either the passage of time or by expending the funds for their RESTRICTED purpose. For example, pledge receivables are, by default, time RESTRICTED because you have not received the funds yet. If there are no other program restrictions on the pledge, when you receive the funds, the time restriction is released because the collection has been made.

3 See section Recording Temporarily RESTRICTED Activity for more information on how to RECORD and release pledge transactions. To RECORD a pledge receivable: o Home Screen / Customers/Donors Create Invoices (make sure it is under the correct Pledge template) Enter the Customer name, class, date of the pledge, item, any other description and amount, then Save & Close To RECORD receipt of the pledge: o Home Screen / Customers/Donors Receive Payments (make sure the correct Pledge Receivable account is in the A/R Account section) Enter the Customer name, amount, date of receipt, pmt.

4 Method, and any other memo or reference you need, then Save & Close If the payment is less than the total amount owed, a screen will show that asks if the underpayment should be left as is or if you want to write off the extra amount. Usually you will leave it as an underpayment until the full pledge has been paid. At any point in time, you can run a report for all receivables by: o Reports / Customers & Receivables / A/R Aging Summary 2011 Jones & Associates LLC, CPAs ( ) 2 Original transaction Journal entry done after transaction Month end journal entry If a pledge is promised to be received over several future years, a discount may need to be recorded.

5 Recording Temporarily RESTRICTED Activity One of the largest areas of confusion in small nonprofit organizations is how to account for RESTRICTED contributions. The accounting rules require that RESTRICTED contributions be recorded in the period in which the contribution is unconditionally promised even if the funds are to be received and used in a future period. This is confusing for most organizations why would you RECORD a contribution before you receive it? The rules state that these sorts of contributions must be separated from your normal contributions in a section called Temporarily RESTRICTED contributions.

6 Then, when the time has come to use those funds for their purpose, they are Released from the restriction and pulled into your ordinary operations. There are basically two types of temporarily RESTRICTED contributions: those promised (see above) and those that have been received in advance that are intended to be used for a future RESTRICTED purpose. The donation income is treated the same way in either case. If you have set up your QUICKBOOKS chart of accounts as suggested in the Example Chart of Account Listing, you will notice the 70000 section on Temporarily RESTRICTED Activity.

7 On the next page are instructions on how to RECORD the various transactions and releases. Color key: 2011 Jones & Associates LLC, CPAs ( ) 3 Transactions related to temporarily RESTRICTED donations: 1To RECORD a new pledgeWhen to make entryTypeDateNumNameMemoAccountClassDebi tCreditWhen pledge is madeCreate I nv oice07/01/20111 Donor 1To RECORD new pledge12510 Contribution Receiv ableProgram: Shelter50, 1To RECORD new pledge70100 Contributions for Future PeriodProgram: Shelter50, , , endGeneral Journal07/31/20111aDonor 1To RECORD all new pledges31000 Unrestricted Net AssetsProgram: Shelter50, 1To RECORD all new pledges31300 Temp.

8 RESTRICTED Net AssetsProgram: Shelter50, , , RECORD receipt on the pledgeWhen to make entryTypeDateNumNameMemoAccountClassDebi tCreditWhen receiv edReceiv e Payments 07/01/20112 Donor 1To RECORD receipt of pledge10100 Operating CheckingProgram: Shelter30, 1To RECORD receipt of pledge12510 Contribution Receiv ableProgram: Shelter30, , , right after transactionGeneral Journal07/01/20112aDonor 1To RECORD receipt of pledge70200 RESTRICTED Funds ReleasedProgram: Shelter30, 1To RECORD receipt of pledge44900 RESTRICTED Funds ReleasedProgram: Shelter30, , , endGeneral Journal07/31/20112bDonor 1To RECORD all releases31300 Temp.

9 RESTRICTED Net AssetsProgram: Shelter30, 1To RECORD all releases31000 Unrestricted Net AssetsProgram: Shelter30, , , RECORD a temporarily RESTRICTED contributionWhen to make entryTypeDateNumNameMemoAccountClassDebi tCreditWhen donation receiv edDonations07/01/20113 Donor 2To RECORD temp RESTRICTED contribution70100 Contributions for Future PeriodProgram: Shelter5, 2To RECORD temp RESTRICTED contribution10100 Operating CheckingProgram: Shelter5, , , endGeneral Journal07/31/20113aDonor 2To RECORD all temp RESTRICTED contributions31300 Temp. RESTRICTED Net AssetsProgram: Shelter5, 2To RECORD all temp RESTRICTED contributions31000 Unrestricted Net AssetsProgram: Shelter5, , , release temporarily RESTRICTED funds related to expenses paid for RESTRICTED purposeWhen to make entryTypeDateNumNameMemoAccountClassDebi tCreditWhen bill is receiv edEnter Bills07/01/20114 Donor 2 Expenses paid for RESTRICTED purpose63560 Medical and DiagnosticProgram: Shelter2, 2 Expenses paid for RESTRICTED purpose63590 General and Other SuppliesProgram.

10 Shelter3, 2 Expenses paid for RESTRICTED purpose10100 Operating CheckingProgram: Shelter5, , , right after transactionGeneral Journal07/01/20114aDonor 2 Release for expenses paid for program70200 RESTRICTED Funds ReleasedProgram: Shelter5, 2 Release for expenses paid for program44900 RESTRICTED Funds ReleasedProgram: Shelter5, , , endGeneral Journal07/31/20114bDonor 2 Release for expenses paid for program31300 Temp. RESTRICTED Net AssetsProgram: Shelter5, 2 Release for expenses paid for program31000 Unrestricted Net AssetsProgram: Shelter5, , , 2011 Jones & Associates LLC, CPAs ( ) 4 Endowments Endowments are contributions that a donor or Board of Directors has stipulated must be held forever.