Building Fund

[jordan2k510]

Our church board recently decided to move the Building Fund (previously a fund managed outside of PC by a different treasurer) to PC and make it part of the General Fund. I would like to maintain the amounts in the fund since they were designated for specific items (restroom, parking lot, etc.) by contributors. When we spend these funds I want the expense to be incurred in a Miantenance Capital Improvement Expense account.
My questions:
1. Should I set up an equity account under temporary donor restricted for the Building Fund (group) with each area(restroom, etc.) as a detail Equity account?
2. Then do I use a transfer account to get the account balances in place?
3. When we spend the monies I would credit savings(where it sits) and debit the expense account. How will the balance in the equity account(s) be adjusted?

[jordan2k510]

Hello if anyone could respond to my question I would really appreciate it. This is my first month using PC. I do not want to put too much of the monthly activity into PC until I get the Building Fund set up correctly. The EOM is approaching quickly!
Thanks, Judy

[JohnDMeyers]

Here are the steps I would do:

1) To simplify the tracking of restricted assets, you could assume the whole of the money in the building fund is restricted. Once the building is built, or to the extent it is built at the end of the year, you can move that money into unrestricted net assets.

2) Set up your chart of accounts in the PowerChurch building fund, allowing your checking and savings assets to include restricted money.

3) If the money in the checking and savings was designated for building use, enter the beginning balances as follows:
DB checking and savings accounts
CR RESTRICTED net assets (equity)

If you have buildling designated income beginning balance, put it under RESTRICTED INCOME categories:
DB checking and savings accounts
CR TEMP RESTRICTED INCOME categorized accounts* (closes to 01-32xx-000, TEMP RESTRCITED equity)
*note, for every TEMP RESTRICTED INCOME account, create a 48xx-000 release income account and a 32xx-000 restricted equity account.

For example:
03-4212-001 restroom designation
03-4812-001 restroom release
03-4812-001 restroom equity

03-4213-002 parking lot designation
03-4813-002 parking lot release
03-3213-002 parking lot equity

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If you have beginning expenses that went to building assets:

DB parking lot asset account
CR checking and savings accounts

DB 03-4812-001 parking lot release (closes to temporarily restricted net assets)
CR 03-4999-000 general release income (closes to unrestricted net assets)

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When you spend money, remember to include the release as shown above. The equity accounts will update automatically because of the "closes to" that you set up in the chart of accounts.

If you set up new income accounts, use the Maintain List of Donor Restrictions wizard and attach it to a contribution fund. Use the "Release Restriction" button in Accounts Payable and the accounts will appear automatically.

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Most of your expenses will DB an asset account instead of an expense account, because you are creating assets with your money.

Some things, like waste removal, will be expenses. That money is not going toward an asset.

When you are done with the building, you can transfer the asset to your general fund by:
CR Asset in Building Fund
DB Unrestricted Equity in Building Fund

DB Asset in General Fund
CR Unrestricted Equity in General Fund

Let me know if you have any other questions.

[jordan2k510]

Thank you for your detailed response and email. I want to avoid adding the balances to income since in previous years we recognized the contributions as income (outside of PC). I do not want to duplicate this recognition of income to the church as our district denomination assessments are based on income. Any thoughts on how I can insure that I do not repeat the income during the entry to PC? What are the transfer accounts used for in PC?

I have been directed by the Administrative Board to track expenses in an expense account called Maintenance Capital Improvements yet I do see your point since we are increasing the worth of the asset of the building with the repairs to the restroom.

Regards,
Judy

[JohnDMeyers]

Judy:

Since your income was given last year, your beginning balances in your checking and savings will be sufficient. You don't have to include and beginning balances in your income accounts.

It is okay to set up expense accounts in the building fund. You can turn the expenses into assets later, when you move the assets from the building fund to the general fund.

I believe it is not necessary to move the exact cost of construction to the building asset amount. You can use some other valuation, such as market value. Check with your CPA on this one, though, I am just thinking out loud.

You can show transfers either by using the transfer accounts (9000s) or equity accounts (3000s). They serve basically the same purpose, with the difference being in what shows up on your financial statements at the end of the year. Again, you can find a CPA to tell you which is "better" for your situation. Either will work. Using transfer accounts, in my opinion, shows more detail. (more detail isn't always the "better" solution).

[jordan2k510]

Thanks. Part of the funds are already tracked in a savings account in PC. This account was closed this month and the money was put in the checking account (by the outgoing treasurer). Now I am ready based on your instruction to establish the temp restricted equity account from two sources, one inside of PC and the other outside. For the outside money no problem - DB checking; CR Restricted net assets (equity) which will bring the outside money into the checking account. For the money which needs to move from the savings account to the checking account and to the equity account what is the JE? DB checking; CR savings; CR equity then to balance DB... what?
Judy

[JohnDMeyers]

Not sure what exactly you are asking.

To move money from checking to savings:
DB savings
CR checking

The only time you will include an equity account in your transaction is if you are setting up a beginning balance, or if you are using the equity account to do a transfer (as opposed to a transfer account).

[jordan2k510]

I would like to set up a beginning balance in an equity account. But I also need to move the money from the savings to the checking account.
DB Checking
CR Savings
this same money should be the beg bal in an equity account
CR building
DB ??

[JohnDMeyers]

To set up a beginning balance of $10,000 in checking:
DB Checking $10,000
CR Unrestricted Net Assets $10,000

To move $3,000 from checking to savings
CR Checking $3,000
DB Savings $3,000

When you want to move $2,000 in an asset account from the Building Fund to the General Fund,
CR Building Fund Asset [in the Building Fund] $2,000
DB Unrestricted Net Assets --or-- DB Transfer Account [in the Building Fund] $2,000

To receive Assets into the General Fund from a Building Fund:
DB General Fund Asset [in the General Fund] $2,000
CR Unrestricted Net Assets --or-- CR Transfer Account [in the General Fund] $2,000

[jordan2k510]

Thanks for all of the information. The last post somewhat confused me as I do not want to set up a separate building fund but move the current building fund remaining dollars (not tracked in PC) into the General Fund. There is only a little money left for bathroom remodeling which is currenlty in a savings account not tracked in PC. This money will be moved to PC and to the checking account balance which is tracked in PC. So to accomplish this would I:
DB checking, CR temp restricted assets (equity account appropriately titled building fund (level 4) with a level 5 account titled Restroom?
Then when we spend this money:
CR checking and DB an expense account Capital Maintenance Improvements.
Then would I CR a building asset account and DB the Restroom equity account to reduce the equity account?

There will most likely be no more contributions for this activity.

[JohnDMeyers]

That's funny. It's easy to mis-read ideas on this forum. I understand now.

You have it figured out up to a point. You are correct with the beginning balance:
DB checking
CR temp restricted net assets Level 4, Level 5 restroom. That's correct.

In order to show the spending of the money, create a "contra-income" account 4812-000 and make sure it releases to your Level 5 restroom equity account.

If you have other temp restricted beginning balances, then, for each Level 5 equity account in Temp Restricted, you will need a corresponding 48xx-000 account that closes to it.

Let me go through the restroom example:
Create:
01-3212-000 Restroom (level 5)
01-4812-000 Release Restroom Restriction (closes to 01-3212-000 restroom)

When you spend $75.00 for the Restroom:
CR checking $75.00
DB restroom expense (or asset) $75.00

DB 01-4812-000 $75.00 (closes to 01-3212-000 Restroom)
CR 01-4999-000 $75.00 (closes to 01-3110-000 unrestricted net assets)

The second transaction is the release. Because the income came in last year, you will show a negative income in 01-4812-000 with no corresponding positive income in an income account for this year. That's ok. When 01-3212-000 goes to zero, that will be your indicator that the entire amount of money has been used up.

You won't directly DB the equity account as you indicate in your post. The use of the "contra-income" account will keep the equity account updated.

[jordan2k510]

John,
Thank you for detailing it so patiently for me. I'll give it a go!
Judy