User Support Forum

An accounting question.

The church sells prepaid cards for the local grocery stores as a fund raiser. It is on going. They buy cards worth $1000 from the store for $950.

How do I handle the transactions? There are times when we have $1900 spent on cards. We'll sell them over 2 months.

I suspect I need a temporary (?) asset account with coordinating income and expense accounts.

Can anyone tell me how to do the accounting on this?

Thanks!

Does the church hold an inventory of these cards and then sell them?

Yes. We have them in denominations of $25 and $50 values. When we fall below $300 we purchase more.

The accounting that you theoretically need to do is inventory accounting, which PC+ is not set up to do. It is possible to do inventory accounting in PC+ on a very limited basis but it will be a manual process and will get complicated if the unit cost of your inventory changes. In order to come up with the accounting entries you need to calculate what the unit cost is. Based on your example, $1,000 will buy 40 $25 cards or 20 $50 cards or some combination thereof. You pay $950 for $1,000 worth of cards. So the unit cost for a $25 card is $23.75 and for a $50 card is $47.50. Accordingly, here's the accounting entries you would make:

1). Purchased $1,000 worth of cards

Debit Inventory $950.00
Credit Checking Account $950.00

2). Sold 1 $50.00 card

Debit Checking Account $50.00
Credit Shopping Card Sales $50.00
Debit Cost of Goods Sold $47.50
Credit Inventory $47.50

As you can see inventory accounting can be complicated to do. While not theoretically correct, in your situation it may be more practical to just expense the cards when you buy them instead of putting the cost into an inventory account. Then when you sell the cards just debit your checking account and credit sales for the selling price.

Thank you!

Since the church has a good turn over for these and the price has remained stable for the las 5 years, I think it may be easier to go with the expense model.

Thank you for your input.