QB Fund Accounting FAQ --- 0601-06 ZZqbb

 

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                             TO:  Interested Ministries                                                                          FROM: Jim Bramer,  Retired Auditor-CPA
                                                                                                                                                      FILE:  0601-06/qbb

                              RE:  QuickBooks (QBs)  FUND ACCTG FAQ                                      Originated in December 1997                                             


        The Frequently Asked Questions (FAQs) below have surfaced as we have, since their beginning, "QBacked or Quarter Backed" Ministries in their use of QuickBooks QBs Pro via the desktop to do Ministry Fund Accounting.  As we all no doubt recognize, Quicken's emphasis is personal finance and we do not generally advice its use for Ministry Fund Accounting.

        But, QBs Pro (
with its Accounting Database, Memorization and Equity/Class features ---- plus its integrated Payroll, Receivables and Payables capabilities), in our opinion, is precisely what most Small Christ-Centered Ministries need in order to do their  Fund Accounting  and be good stewards of their finances.   Be sure and understand our position in FAQ #5  below about using QBs Pro to do your Donation or Contribution record keeping, or accounting.   Please go to  Sitemap  for more information about the use of QBs Pro at such Ministries.   Please Click Here  for information as you apply GAAP (Generally Accepted Accounting Principles) as unique to Ministries to what is offered here.  
Also please go to  QBOE. and learn about using QBs on the Web (QBs Online Edition).    

        Go to this link: http://groups.yahoo.com/group/qbunch
 for a QBs Pro Forum for Ministries. 
 
        By the way --- we are convinced that, in order  to do your needed Ministry Fund Accounting,  you do NOT need any of the QBs Non Profit versions or even the latest version of QBs Pro.   We point you to   www.ebay.com   where you can obtain an unused QBs Pro older version very inexpensively.  Be sure it is compatible with versions of your existing Computer software, etc.  If you already have a version of QBs Pro you might find of value this Self-Help Hands-On resource when you  Click Here.  Let us know at  Jim@bcidot.org   if you would like any of these QBs documents in the WORD doc format.

         Our numbered F)requently A)sked Q)uestions  - FAQ - list appears below; please click on the FAQs below of interest to you.

  1. What do you mean when you say "Ministry Fund Accounting"?
  2. Please tell us about the different methods to do Ministry Fund Accounting within QBs
  3. Why do you recommend QBs Fund Accounting Method One ... and can QBs handle different sets of books you mention above?
  4. Can QBs handle non calendar Fiscal Years?
  5. What about QBs doing our contribution record keeping?
  6. What is Functional Expense accounting (or GAAPthat is required by our CPA firm and the IRS ... and can QBs do this for us?
  7. What about other accounting regulations that is required by our CPA firm  .... how is QBs involved?
  8. We are just about sold on using QBs in our Ministry in the way they you describe.  But we would like to experiment some before we make a leap like this.  Any thoughts?
  9. Do you know of any other QBs Ministry Finance resources?
  10. List of "Frequently Used Terms" applicable to this Onliner Document

- FAQ # 1 - 

Q>  What do you mean when you say Ministry Fund Accounting?

A>  To answer this entire group of FAQs here, you will benefit best by Clicking Here  and Here  and digest our expressed foundational Ministry Fund Accounting views within these writing. Such an understanding will greatly assist you as we answer subsequent FAQ questions having to do with the following:.

       We are convinced that proper use of QBs for Fund Accounting can help you carry out such fiscal stewardship responsibilities as you:

  •    Efficiently account for money received;

  •    Disburse money within imposed limits;

  •    Timely know ' imposed limits' information per the balances in SPFunds;

  •    Gain GPFund information and "Actual to Budget - A to B" status;

  •    Know amount of generic Money on Deposit  (note:  please DO NOT  marry imposed fund balances to their own specific Bank Accounts);.

  •    Immediately know which funds have an investment in this "Pooled" or generic Money on Deposit;

  •    Appropriately handle aspects of financial Giving Records.

Return to the FAQ List


- FAQ # 2 -

Q>   Can you personally help us in our use of QBs at our Ministry?  Please tell us about this and the different methods to do Ministry Fund Accounting within a QBs  product. 

        A>  Please Go Here  where we make known how we "Coach" Ministries in their use of QBs to do their unique accounting as set forth Here  and  Here We are told that there are many QBs users via the Microsoft and Mac formats. You can readily use QBs to do Ministry Fund Accounting (99) via at least four methods.

                       Recommended Method One ... Click here for details below

     Use
QBs Income/Expend accts for the GPFund:  Use QBs  Equity Accts for individually named SPFunds;   PLUS (be sure you understand this vital issue) your use of QBs  Classes for Beginning Balances and P & L therein (or by types of Income/Expend within all or applicable SPFund).  Be sure you understand the ability to "filter" for a variety of needed SPFund reporting purposes.

                                   Method Two ..Please  Click here  for details below

      Same as Method One, but you do not use the
QBs Class for types of Income/Expense within all or applicable SPFunds. 

                                 Method Three ...Please  Click here for details below

        Same as Method One,  but you do not use
QB's normal Income and Expense feature since all GPFund and SPFunds   activity flows within applicable QBs  Equity Accounts.   

                                     Method Four... Please  Click here for details below

      This is the Intuit suggested method where you use
QBs  Income/Expend accts for all Income/Expenditures and then use the QBs  classes to primarily specify the applicable SPFunds  involved.  

                                                             Other Methods ...

         Please  Click Here  and learn what others have shared about QBs  Ministry Fund Accounting methods they use, etc.

QBs Fund Accounting Method One (10)

  •    The Ministry structures its SPFunds as QBs  Equity type Accounts - notice the QBs  Equity Chart of Account Types per This condensed sample below.:
QB Chart of      
Acct Types Assets:    
Bank     Checking- Savings  $ 16,787  
Fixed Assets     Land Bldg and Equipment    
         Total Assets    $16,787
     
Liabilities:    
Acct Pay         Payables    $  1,689
Fund Balance - Net Assets:    
  QBs Equity Accounts    
Equity          Donor Restrictions  $   4,700  
Equity          Board Discretionary   $ 15,774  
            Total SPFund  $ 20,474  
  QBs GPFund YTD  (Loss)   $  (5,376)  $15,098
       Total Liability and Fund Bal    $16,787
  Click and see contents of colored Hyperlinks above    

    Some of you prefer to use QBs  Long Term Liability type accounts, but we prefer the "QBs Equity" type accounts because this implies available Ministry resources, or unspent Ministry Net Income , while "Liability" is usually construed to mean unpaid debt to creditors.
   One of the major advantages in using this Method is that it allows you to immediately know, when publishing a Balance Sheet,  who belongs to the pooled monies on deposit. 

   Please
Go Here  for more
Fund Accounting via QBs Method One perspective.
  Then use QBs Classes for Beginning Balances and "
reasons why SPFunds change"; yea, a SPFunds Profit and Loss Statement;  see a sample SPFunds Class Integrity Proof report below:.

  • Jul 1, xxx0 - May 31, xxx1#20

    First of Year Balances

    95,000.00

    SPFunds Income

    Earned Income

    50,600.00

    Donation Income

    60,400.00

    Total SPFund Income

    111,000.00

    SPFunds Expenditures

    Operating Expenses

    -116,525.95

    FAsset Acquisition

    -74,500.00

    AllElse Expenditures

    -1,000.00

    Total SPFunds Expenditures (1)

    -192,025.95

    Cross Fund Income

    6,500.00

    Grand Total SPFunds

    20,474.05

  •    The GPFund uses the regular QBs Income and Expenses;
       Also use QBs Classes for GPFund departments or what we call D)ollar A)ccountability G)roups - DAGs;.
       Utilize the QBs A)ctual to B)udget -A to B- features for GPFund spending controls - see
    GPFund "A to B" below as an example.


  •  
    • Jul 1, xxx9 to May 31, xxx0 (91)

      Actual

      Budget

      Variance

      Income

      AllElse Income

      1,500.00

      Donations Income

      77,800.00

      Earned Income

      50,000.00

      Total Income

      129,300.00

      Expense

      Salaries and Benefits

      57,500.00

      57,666.67

      -166.67

      Supplies and Expenses

      47,925.85

      48,075.00

      -149.15

      Debt Servicing

      15,000.00

      15,041.67

      -41.67

      FAsset Acquisitions

      5,000.00

      5,000.00

      0.00

      AllElse Expenses

      2,750.00

      2,758.33

      -8.33

      Total Expense

      128,175.85

      128,541.67

      -365.82

      Net

      1,124.15

           

      Cross Funds Expense (1)

      6,500.00

      6,516.67

      -16.67

      QB GPFund  YTD (loss)

      (5,375.85)

           

   CAUTIONThis Fund Accounting method obviously does NOT permit QBs to combine all of the Ministry's Income and Expenditures (some are QBs Classes and some are not, etc). 
    The Big Pix Sample. (95) below meets this need as provided via an Excel driven report that combines the GPFund and the SPFunds (not from the data above).  Even more important,  this provides a one-page condensed over view of all the finances that is often helpful to your Board members as they take a "Big Pix" view of your finances.  When you Click Here you will find a "Big Pix" type report that also includes a recap of your applicable Building/Construction activity --- plus an alternative way to account for and report Defrayments (see "Event Reimbursement/Other" Revenue below).

    Big Pix

For 11     Months (97)

(1)Special

(2)General

         GPF Expenditure

Totals

Funds (SPFunds)

     Fund (GPFund)

           Budget To Date

Variance

Revenue:

$138,200

Donations

$60,400

$77,800

$102,100

Event Reimb/Other

$50,600

$51,500

$240,300

Total

$111,000

$129,300

Expenditures:

$57,500

Salaries/Benefits

$57,500

$57,666

($166)

$164,452

Operating Costs

$116,526

$47,926

$48,075

($149)

$74,500

Property Acquisition

$74,500

$15,000

Debt Servicing

$15,000

$15,042

($42)

$5,000

Mission Support

$5,000

$5,000

$0

$3,750

AllElse Expenses

$1,000

$2,750

$2,758

($8)

$0

Internal Transfers

($6,500)

$6,500

$6,517

($17)

$320,202

Total

$185,526

$134,676

$135,058

($382)

($79,902)

($74,526)

($5,376)

Annual GPF Budget

$147,470

Weekly Need

2,836

Begin Balance

$95,000

GPF Income to date

$129,300

End Balance as computed

$20,474

Divided by wks to date

48

"Spoken for" as follows:

Weekly average

$2,694

Weekly difference

$142

Donor Restricted

$4,700

Ending:

Board Discretionary

$15,774

Bank Balances

$16,787

Less: Liabilities

$1,689

Down proof is:

$15,098

TOTAL FUNDS

$20,474

($5,376)

Cross proof is:

$15,098

                    (1)  Via QBs Class "reasons why Special Funds change," or Income and Expenditures
                    (2)  Via
QBs Income  and Expenditures

  •     Please Go Here  for detailed QBs Method One implementation steps as we have you set up your own QBs file and walk you through the QBs Method One setup and you do some transactions processing and process the QBs Method One Proof Reports. 

  QBs Method Two - QBOE (14) -

        This QBs Fund Acctg method Method Two pertains almost exclusively to the use of QBs for the Web -- QBOE via the Web -- as it involves use of QBs Equity Accounts for Fund Accounting ---- it does NOT involve the use of the QBs Class feature.  QBOE now allows the use of QBs Classes beginning in 2005. This option pertains, in our opinion,  to a smaller Ministry who has 10 or fewer Special Purpose Funds (SPFunds).  The usual QBs Income and Expense accounts are used for the General Purpose Fund only.

   CAUTION This Fund Acctg Method Two also does NOT permit QBs to combine the Ministry's Income and Expenditures (GPFund) and such activity within the QBs Equity accounts (SPFunds). The SPFund Bal Forward, Income and Expenditures transactions will likely have to be entered a second time.  Ask us at about producing a Excel doc from the SPFund Equity Accts activity for such a purpose. The Big Pix Sample. (97) above meets this overall reporting need as provided via an Excel driven report that combines the GPFund and the SPFunds overall operations at a Ministry. 

QBuxBox Method Three (11)  )--   As set forth when you make use of most of the  eFinFax  systems, this method is basically an alternative   spending control   system as you:

  •   You usually structure SPFunds as QBs Equity Accounts;

  •   Use QBs Classes for "reasons why SPFunds change" - see above SPFunds Class report as an example;

  •   Each DAG (Department) within the GPFund has its own QBs Equity Account;

  •   QBs Classes are used mostly for department expense line items;

  •   Not use the usual QBs Income and Expenses feature;

  •   Not use QBs Budget feature; please Go Here  for info what we call Receipt Assignment Accounting. Or the GPFund income is assigned upon receipt to each GPFund department; via sequential priority order where the Department can only spend money if receipts have been so assigned.  There are no 'Actual to Budget' reporting methods or issues per se under this Method Three since you spend only what is available per this Method's fund balance.  Ask us about using QBs Excel features for such purposes.

  •   See below for a sample status report (usually weekly) - Click Here for more details:

Acct Types Assets:      
Bank     Checking- Savings     $16,787 
Fixed Assets     Land Bldg & Equipment      
         Total Assets       $16,787 
Liabilities:      
Acct Pay         Payables       $  1,689 
Fund Balances - Net Assets:      
SPFunds      
Equity    Approved donor restrictions  $       700    
Equity    Building Fund  $    4,000    
Equity    SetASide for named purpose $  15, 774    
Equity ((Deficit) from last year $   (6,362)    
            Total SPFund    $ 14,112  
GPFunds      
Equity        
Available for this Years Operations:      
Equity   Church Staff Costs  $      562    
Equity   Missions Costs  $      234    
Equity   Mortgage & Facility Operating Costs  $        56    
Equity   Program #1 Costs  $        34    
Equity   Program #2 Costs  $      100    
      Total GPFund (Deficit)        986 
Total Fund Balances       $15,098 
             Total Liab and Fund Bal       $16,787 
Click and see contents of colored Hyperlinks above  

 Please Click Here  for QBuxBox activity sample within such a GPFund DAG (Dollar Accountability Group).

    QBs Method Four -- It is this method that QBs  points you to in their Industry Help pages. Please Click Here   for more comparative data re Fund Accounting via QBs Method One and QBs Method Four.

  •   NOT use QBs Equity Accounts for SPFunds;

  •   Classify QBs Retained Earnings for beginning Fund balances info - usually as a QBs Income. See 0690  for more information.

  •   Use the usual QBs Income and Expense features for all transactions;

  •   Use QBs Classes to specify applicable SPFunds;

  •   Also use QBs Classes to specify applicable GPFund - departments;

  •   Or simply use the above generic QBs Income and Expense feature for GPFund purposes, without any GPFund - department classes;

  •   All areas could use the QBs "Actual to Budget" spending control feature.

Click here for info about how other methods are used to do Ministry Fund Accounting via QBs.

Return to the FAQ List


- FAQ # 3 -

Q> Why do you recommend QBs Fund Accounting Method One ... and can QBs handle different Sets of QBs you mention above?

    Primarily because QBs Methods One and Three  (plus Method Two -- especially when using QBs  for the Web -  QBOE via the Web - as of the updated date above)  provides you with immediate status information right after you have entered a transaction into the system. Or you immediately know who/what belongs to the Pooled Money on Deposit by viewing either the QBs Chart of Accts (you access and view and do no further processing) or via the production of a QBs Balance Sheet - Click Here .     Method One also provides clean use of QBs classes for both GPFund DAG (or departmental) information -- including "Actual to Budget" --- and for reporting reasons why SPFunds change during the fiscal year.  See FAQ #2 above for examples.

  •        The basic advantage in Method Three is the Spending Control you have upon assigning GPFund receipts to applicable GPFund QBs Equity accounts. But using QBs classes for both GPFund departments and SPFund purposes are not as clean.

            We maintain that
    Methods One, Two and Three, especially Method One, are superior to Intuit's Method Four, basically because the user must run a report for each SPFund (via QBs classes).  This can be quite cumbersome, let's say, when you have more than five SPFunds that you need to efficiently monitor.  Please Go Here  for more details on this topic.  Ask me at   Jim@bcidot.org  about the Umbrella (or Cubby) method whereby the Pooled bank account has a subsidiary listing showing Fund Balances.

        As indicated Here,  you can readily establish an independent QBs Company for separate sets of books that you might need for such purposes as: LB&E (and related Construction), SCRIP and Annual re GAAP, etc.  Please Click Here  for access to such QBs Samples. 

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- FAQ # 4 -

Q>  Can QBs handle Non Calendar Fiscal years?

        A>  Absolutely .... we get into this topic in depth when you Click Here.

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- FAQ # 5 -

Q>  What about QBs doing our Donation or Contribution record keeping - accounting ?

  A>   If you have more than 50 donors, we generally do NOT recommend that you integrate your giving record information within QBs.    Please Go Here   and pursue what we have to say about Dona)tion and Mail)ing --- DONAMAIL.  But some Ministries insist on using QBs for DonaMail purposes -- especially via a separate QBs DonaMail company --  please Go Here  for our QBs Giver DBase information. 
            Also see the contents Found Here  as we discuss separate compartments and Church Management Systems, etc.

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- FAQ # 6 -

Q>  What is "Functional Expense" accounting required by our CPA - Audit firm and IRS - and can QBs do this for us?

    A>  "Functional Expense" information is needed to periodically comply with aspects of General Accepted Accounting Principles, or  GAAP , and show readers of a Ministry financial's annual statement just how much has been spent for Program, or the fundamental reason why you exist, plus amounts spent in supporting the Ministry via the necessary Fund Raising and Management/General activities.  If you file form 990, you need  "Functional Expense" information.

            We maintain that your primary accounting system responsibility is to provide you with the daily accounting reports needed to make prudent and timely management decisions via the above SPFunds and GPFund structure.   The Seven Goals found HERE might also be of interest to you.  Also see our Editorial Here  where we speak to what we call "GAAP Overkill" -- especially in a Church setting.

        Then, at the year end,  restructure such expense data for the necessary and vital "Functional Expense" information for mostly year end reporting to the public, and maybe for filing with the IRS.   Ask us about making full use of QBs Class feature during the year so that at year end you can make full use of QB export feature as information goes to Excel  spreadsheets. Ask me at  Jim@bcidot.org  for more info on this topic. Please Go Here  for Some Church Year End Report Samples.  

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- FAQ # 7 -

Q>   What about those other accounting regulations that our CPA firm requires us to maintain  --- how is QBs involved?

        A>   Your CPA-Audit Firm is interested in you complying with GAAP - Generally Acceptance Accounting Principles.  In addition to the above Functional Expense issues, you need to know, at least AT THE YEAR END, the types of Fund Balances, or technically the term is "Net Assets"  (or the difference between Ministry's Assets and the Liabilities). You need to inform readers whether these Net Assets are "Unrestricted", "Temporarily Restricted" or "Permanently Restricted."  The above QBs sets of books we describe within this 0601-06 document will supply you with all of the needed income, expense and other year end information.   As in the FAQ #6 above, please also be aware of our "GAAP Overkill"  editorial Found Here.

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- FAQ # 8 -

Q>  Our Ministry Finance Team is just about sold on using QBs in our Ministry in the way you describe. But we would like to experiment some before we make a leap like this. Any thoughts?

        A>  Yes...... as indicated above, we generally recommend that you use the QBs for Fund Accounting per Method One. If you are serious about this,  regardless of your fund accounting or QBs experience, we strongly recommend that you ---

  •  -- Please Go Here  and go through the step by step "Self Help - QBs Hands On" process.  This includes instructions as you use your QBPro version (not necessarily the latest version) to set up a small QBs Method One Sample and process transactions that include the unique annual "Fund Balance Forward" process.

  • -- As needed, please make use of the resource Found Here and possible coaching explained when you Click Here.

  • -- By then you should have enough of a feel for how QBs Method One functions so you can decide if it is for you.

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- FAQ # 9 -

Q>  Do you know of any other Online Ministry Finance QBs resources?

A>    Please access a QBs Yahoo group (which we affectionately call the QBunch) which can be found at: http://groups.yahoo.com/group/qbunch.  Please  Go Here  for a list of known Ministry Finance Web Sites; also go to known QBs enhancement Sites are DataBlox and WriteItOnce.  The QBs Boards/forum where you interact re NPO/Churches etc is at  Industry.   

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 #10

     " FREQUENTLY USED VOCATIONAL TERMS"   BELOW INCLUDE:

   A to B = Actual to Budget reporting
   Chart of Accounts  -  Infrastructure of assets, liabilities,  Income/expenses  plus applicable operating departments.
   Class = Feature of Quickbooks  (QBs)
   DAGs =
Dollar Accountability Groups; often GPFund departments
   DonaMail =Donation and Mailing database file
   FAQ = Frequently Asked Questions
   Fiscal Year = 12 months, usually means other than calendar year
   Functional Expenses = Expense categories including
Program plus
General & Administrative and Fund Raising
   GAAP =
Generally Accepted Accounting Principles
   Giving Records = Record of Donations usually by a Giving unit
   GPF = General Purpose Fund, or a singular
GPFund
   Method One = Preferred way to use
QBs to do Ministry Fund Acctg
   MFTeam = MFT, or
Ministry Finance Team
   NPO =
Non Profit Organizations
   Plastic - Credit Card
   Proof = Recommended
QBs Reports that proof dollar integrity, etc.
   QBs = QuickBooks Pro, not always the latest version
   QBOE  =  QuickBooks
Online Edition via the web, or directly via the Internet
   SPFs =Special Purpose Funds, or multiple
SPFunds

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       This was UPTD last on  April 07, 2012 Please Go Here   for a list of other Ministry Finance FAQs at www.bcidot.org

 

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