Using Liabilities accounts for Internally-Committed Funds

I've got some information to get these funds recorded accurately in QuickBooks, @BoosterMom.

The Starting date & opening balance when setting up an account is the amount of your actual bank account for whatever day you choose to start tracking transactions. You can read this article to learn more: Enter and manage opening balances in QuickBooks Online.

If you aren’t sure about the amounts or still need to check them, you can leave the Starting date & opening balance blank temporarily. The program allows you to skip it and modify the name in the register. Let me show you the steps:

1. Select the Gear icon or Accounting menu.
2. Choose Chart of accounts.
3. Locate the misspelled account.
4. In the View register dropdown, click Edit.
   
5. Correct the name and press Save after.

Since making journal entries requires depth understanding of debit and credits, it would be best to contact your accountant. They can provide information about managing liabilities and ensure your funds are tracked accurately in QuickBooks.

If you don’t have an accountant yet, you can visit our ProAdvisor website to find one. Our ProAdvisors can guide you further from technical and accounting perspectives. Just simply enter your city or ZIP code.

Here’s an illuminating guide to learn more about how debits and credits work behind transactions and what to expect when entering them: How accounts are affected by debits and credits.

You can mention me anytime if you have any other concerns or questions about managing non-profit finances. I’ll get back to you as soon as I can. Have a good one and take care always!

@BoosterMom 

You can't record these as liabilities if they aren't legally restricted funds.  When you receive funds that are not legally restricted funds, they should be recorded as income, not a liability.  You can, however, earmark them by creating separate sub-accounts under your bank account to show how they are allocated and then deposit/transfer them into their respective sub-account in QB. 

Thanks @Rainflurry

OK, so liabilities must be legally-binding?  These are funds we have decided internally to give away as grants, but it will be 6 months until we can pay them out, so definitely not legally binding.  I just hate having them 'only in my head'. 

I think you are suggesting that I create sub-accounts in QB under my (Checking/Asset) account; that's an approach I had not considered!  Once I create the sub-account in QB, how would I 'move' the funds to the sub-account - a JE to both?

@Rainflurry 

That worked perfectly - thank you so much!

I like this solution (creating sub-accounts to checking) a lot, but does it create any additional steps when reconciling the checking account either manually or linking electronically to the account?

- Tracy Deans

Thanks for joining the thread, Middlesex Baptist Church NC.

When it comes to reconciling your checking account, you only need to reconcile the parent account because all transactions in the subaccounts roll up into it. If you need further help reconciling accounts, see How to reconcile accounts for a step-by-step guide.

Just in case you need to connect your sub-accounts to online banking, you need to know how your bank sends the downloaded transactions. If the transactions download to one account, connect only the parent account. If the transactions download to the individual accounts, connect the subaccounts and not the parent account.

We can’t connect both a parent account and its subaccounts. If you try to connect both, you’ll get a message that the account is already connected. You can check out this article for the steps and details: About bank or credit card subaccount setup. 

Feel free to visit this article as your reference to guide you in doing and fixing reconciliations in QuickBooks: Learn the reconcile workflow in QuickBooks.

Please feel free to leave a comment below if you have other banking and reconciliation concerns or questions about managing transactions. I'm always ready to help.

I came to ask the same question, as we have "restricted" funds for various ministries within our church.  I had set up "other current liabilities" for these accounts so that any money being collected for each fund was not counted as general donations, however it was still being deposited to our main account. The problem with this is to know what our true balance is in our bank account, we need to take the account balance and subtract the total of all of liability accounts for ministries.   I would like to set up the bank sub-accounts under our general checking account instead.  What is the best way to move the amounts I previously had recorded in the 'other current liability' accounts to a new sub-bank account under our main general checking bank account?  This is where I have gotten stuck as my quickbooks knowledge is still developing. Any guidance you can give would be much appreciated. 

We appreciate you joining the thread, @adayton. We'll provide details to help you transfer funds from a new sub-account in your Chart of accounts inside QuickBooks Online (QBO).

Before anything else, please know that it isn't the experience we want you to have when managing funds and transferring them to a new account inside COA. In QBO, you can enter a journal entry to transfer funds to your preferred account. We'll outline the steps to get you going:

1. Access your QuickBooks Online company.
2. On the left navigational bar, click the + New button and select Journal entry.
3. On the first line, select an account from the Account field. Depending on if you need to debit or credit the account, enter the amount in the correct column.
4. On the next line, select the other account you're moving money to or from. Depending on if you entered a debit or credit on the first line, enter the same amount in the opposite column.
5. Check the amounts - you should have the same amount in the Credit column on one line and the Debit column on the other. This means the accounts are in balance.
6. Enter information in the memo section so you know why you made the journal entry.
7. Select Save and new or Save and close.

For more information, please see this article: Create journal entries in QuickBooks Online.

If you're unsure of the process, you can contact an accountant. This way, they can guide you and ensure the funds transfer to your preferred account. If you don't have an accountant, I can help you find one. Feel free to visit this page: Find a QuickBooks ProAdvisor.

On the other hand, here's an article to help you modify transactions in your account registers and ensure that you entered inside the program tracked accurately:

• Find, review, and edit transactions in account registers in QuickBooks Online
• Run reports in QuickBooks Online

The Community space is open 24/7 if you require a helping hand managing funds or transferring them to another account inside your COA. As always, our team will assist you as soon as possible. Stay safe.

@adayton 

"The problem with this is to know what our true balance is in our bank account, we need to take the account balance and subtract the total of all of liability accounts for ministries."

The fact that you need to subtract a liability from your bank account to get your balance doesn't make sense because one is a debit and one is a credit. You may need someone to take a look at your books because you should not have to do that and I can't imagine a scenario where that would even work.  How did those balances get into liability accounts?  Every entry in QB is based on double-entry accounting which means that every entry hits two accounts.  So, for example, if you received funds that you classified as liability (via a deposit or sales receipt), a corresponding amount should have ended up in your bank account.       

 "I would like to set up the bank sub-accounts under our general checking account instead. What is the best way to move the amounts I previously had recorded in the 'other current liability' accounts to a new sub-bank account under our main general checking bank account?"

If the amounts in the liability accounts are positive then you can't move them to a bank account.  If you attempt to move the balance from a liability account to a bank account, it will reduce your bank balance, not increase it.