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Super Contributor *

Capturing restricted funds in nonprofit organizations

I have a question on the use of classes as outlined in "Running Quickbooks in Nonprofits"  by Kathy Ivens.   I have classes for unrestricted, restricted, and temp restricted funds plus Admin, Program, and Fundraising for expenses as she recommended. 

I am using customer/job for grants.  Am I correct that I should use the "restricted" class for both income and expense postings with my "grant" job(s)?  The book seems to indicate you only use this for recording income but it would seem to be better to track the entire cycle of each job/grant to restricted. 

I am also not sure when a nonprofit would use "temporarily restricted". I understand the definition but could use some examples.  Thanks

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Best answer 12-10-2018

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Established Community Backer ***

"Am I correct that I should use the "restricted" class fo...

"Am I correct that I should use the "restricted" class for both income and expense postings with my "grant" job(s)?"

Keep in mind her book is a guideline, not a factual structure. If your programs already are Restricted Purposes, then specifically using "Restricted" is Redundant; just use Programs and Purposes for Class tracking. Or, Restricted is a Parent level, and Unrestricted or "business type" activities is another Parent. The subclasses would be your Programs and purposes; the subclass of Unrestricted would be Admin, Fundraising, etc.

You get to structure this for what you want to see in your reporting. A great reference in the US is the United Way; sit on their financial board sessions some time or meet with their person who helps submitting organizations come into compliance with UW reporting.

"The book seems to indicate you only use this for recording income but it would seem to be better to track the entire cycle of each job/grant to restricted."

Job Tracking gives you the reporting for Ins and Outs. Class is the additional cross-reference. That way, you can run P&L by Job, filter for one class; or, P&L by Class, filter for one Job. Job = Grant.

"I am also not sure when a nonprofit would use "temporarily restricted". I understand the definition but could use some examples."

You have an endowment campaign or a Grant that is performance-related. You take in all funds as Liability = temporarily restricted. You release them and apply that to invoices for Funds Earned (now it is income) and also rebalance Equity to show the release of Temporarily Restricted funds. Or, you get funded for a Summer Camp for disabled kids, and apply for a Matching Grant = the funds you got might be Temporarily restricted and must be returned if you don't get awarded the matching grant.


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Established Community Backer ***

"Am I correct that I should use the "restricted" class fo...

"Am I correct that I should use the "restricted" class for both income and expense postings with my "grant" job(s)?"

Keep in mind her book is a guideline, not a factual structure. If your programs already are Restricted Purposes, then specifically using "Restricted" is Redundant; just use Programs and Purposes for Class tracking. Or, Restricted is a Parent level, and Unrestricted or "business type" activities is another Parent. The subclasses would be your Programs and purposes; the subclass of Unrestricted would be Admin, Fundraising, etc.

You get to structure this for what you want to see in your reporting. A great reference in the US is the United Way; sit on their financial board sessions some time or meet with their person who helps submitting organizations come into compliance with UW reporting.

"The book seems to indicate you only use this for recording income but it would seem to be better to track the entire cycle of each job/grant to restricted."

Job Tracking gives you the reporting for Ins and Outs. Class is the additional cross-reference. That way, you can run P&L by Job, filter for one class; or, P&L by Class, filter for one Job. Job = Grant.

"I am also not sure when a nonprofit would use "temporarily restricted". I understand the definition but could use some examples."

You have an endowment campaign or a Grant that is performance-related. You take in all funds as Liability = temporarily restricted. You release them and apply that to invoices for Funds Earned (now it is income) and also rebalance Equity to show the release of Temporarily Restricted funds. Or, you get funded for a Summer Camp for disabled kids, and apply for a Matching Grant = the funds you got might be Temporarily restricted and must be returned if you don't get awarded the matching grant.


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Super Contributor *

Can you see a situation where I would have "Restricted" f...

Can you see a situation where I would have "Restricted" funds and not use "Job" functionality?  Grants are the only example I can come up with. Only if there would  be other entries not using "Job" would I need to use the "Restricted" class. Yes?

Still: I have "Class Tracking" turned on so I will be prompted to enter a class. Shouldn't I just use "Restricted", "UnRestricted", and "Temporarily Restricted"?
Established Community Backer ***

"Can you see a situation where I would have "Restricted"...

"Can you see a situation where I would have "Restricted" funds and not use "Job" functionality?"

Like this: I run an Animal Shelter. My Programs and Purposes including fees for placements, and that is Restricted Income, because my program is a Restricted Purpose. Actually, in my case as a QB user that loves to track and analyze data, the Animal Names would be jobs, for tracking, if I could do this and not overwhelm the data file :) Okay, how about: We provide Security at the County Fair and the contract pays us $500. They only contract with NFP entities, and allow us to rent a food booth, too. The Fair funds are Restricted for our programs and purposes, since we were specifically there Not to make taxable reportable gross sales as Food Vendors. We also have 500 members who pay $10 annual dues, and that $5,000 is Unrestricted for Operations and Admin.

"Only if there would  be other entries not using "Job" would I need to use the "Restricted" class. Yes?"

Lots of things result in Restrictions. You can have Board Restrictions, Time restrictions, Committed Fund Balances, etc.

"Still: I have "Class Tracking" turned on so I will be prompted to enter a class. Shouldn't I just use "Restricted", "UnRestricted", and "Temporarily Restricted"?"

I don't use Classes like that. You can use Class for Profit Center (income only), Cost Center (expense only) or Both needs. Class is used for Business as well as NFP, as a way of getting Divisional reporting. If this is a true NFP, nearly everything is Restricted already, and you can segregate by Class, and even Parent Level, as I noted, like this:

I have a church, and missions, and rental apartments for low income, and offer Training sessions in our common spaces, and an Adult Dropin Respite Daycare and a Food Bank.

Class = Unrestricted; subclasses = Admin, Property Management, Adult Day Care and Training

Class = Restricted; subclasses = Mission(s) and Food Bank.

I get Grants for Property Management and Food Bank and I charge DHHS for Adult Care on site, too. That means I have some Temporarily Restricted Funds (grant to provide better ADA access to my apartments) and income as Business Operations from the Adult Care fees. Donations to the food bank qualify as Charitable Donation write off for the individual donors.

Another example:

I have a 501(c)(4) membership entity for a specific purpose, such as Support the Library. This entity can establish a 501(c)(3) for Reading Literacy.

A lot of people specialize in this, if they get into it at all.
Community Contributor *

Re: Capturing restricted funds in nonprofit organizations

I'm new to QB and I have a nonprofit . My Q&A is on class, we do a lot of fundraisers like yard sale book sale and that is how we make some of our money to or 501 c3  for Fishers of Men for Veterans. What I need to know is do we put it under a class or what . I have watch a lot of youtube as learn, puzzled as to were to put all of that as in our yard sales, booksales . If you would please help me.

 

Thank you

Marty Jarvey

Moderator

Re: Capturing restricted funds in nonprofit organizations

Hi Marty,

 

Welcome to the Community!

 

Class/Location tracking lets you manage account balances by department, office locations, the properties you own, or another relevant sources. For example, you're selling some books. You would want to keep track of how many books where sold in a location or department. Then, you'll just run some Profit and Loss by Class report show you these details. 

 

To give us some more idea about this feature, please check out our blog: How to Use Class Tracking in QuickBooks.

 

If you have any questions, please let us know. We're happy to help. 

 

Established Community Backer ***

Re: Capturing restricted funds in nonprofit organizations

"What I need to know is do we put it under a class or what . I have watch a lot of youtube as learn, puzzled as to were to put all of that as in our yard sales, booksales ."

 

You will use Customer names for generic fundraisers; you will use Items that flow to accounts, such as Service items for Donation and you can set up one for "pizza party" and use Quantity. That means this would be a Sales Receipt for the date of the event:

Customer name = Fundraiser

Item sold = pizzas

You use Class, because this is for a specific program or purpose, such as Food Bank fundraiser.

 

So, for example, Book Sales = people give you used books and you acknowledge this with a Donation in Kind service item. This is a Sales Receipt for that name, the DIK item, and then you pretend to Deposit this to a Bank account named for Barter or Clearing. Then, you have a total in that "bank" and you use a Check entry to Buy that same total as Books to sell = Cost of Goods Sold. Now the Clearing Bank is 0.

 

The Books are sold, and that is income to you; since you sold an actual product, you might need to track this for Sales Taxes, of course. But the point of the Sales Receipt is to summarize the entire event. You Class track it so that the Financial reporting falls in the appropriate column of P&L by Class. And the Charge item(s) you list on these transactions flow to the accounting. You don't even need a customer name on these summaries at all, but that would make it helpful to see in Sales reporting the Book Sales year over year, to that same "customer" name.

Community Contributor *

Re: Capturing restricted funds in nonprofit organizations

Thank you for getting back to me. I do hope I'm not a nuisance ,but would there be a youtube or something I may watch so I know what you message me.

 

Thank you for your caring heart

Marty

QuickBooks Team

Re: Capturing restricted funds in nonprofit organizations

Thanks for your reply, Marty.

 

You can check our QuickBooks channel on YouTube or search for a Class Tracking video. Other users also share videos relevant to your concern.

 

You can also check the blog provided by my peer GarlynGay for more information about Class Tracking.

 

Feel free to reach out to us at anytime you have questions about QuickBooks. Thanks.

Not applicable

Re: Capturing restricted funds in nonprofit organizations

For our non-profit, we receive grants, for which we need to track expenses and reconcile at the end of the reporting period. What is the best way to show both the income from the grant and the expenses tied to that grant?

 

Using QuickBooks Desktop Premier - Nonprofit 2019

 

Tom Woodbery

Community Explorer **

Handling equity accounts

I'm a long-time QB user who is now using Premier for NonProfits for the first time.  I don't have any problems with Donors/Customers, Revenue, Programs, Expenses or Classes.  However, I do have some questions:  1- I knew that I had to separate Net Assets into Permanently Restricted, Temporarily Restricted and Unrestricted accounts, but even after reading Kathy Ivens' book, I don't understand how.  How do I do this for the current year?  2-  We raised money for a particular use, which I tracked by revenue account, expense account and class.  What do I do when we write a check to transfer the donations?  Is that treated as an expense?  Or do I just write the check against a Net Asset account?  If the latter, that seems to show revenue that is no longer available (although it is not in the bank account).  3- How do I run a report that shows the balance in net assets by class?  We have some multi-year programs and there is no way to see the balance -- I have not been able to customize the balance sheet to show classes.

Is it possible for me to talk to someone on the phone?  I'm very disappointed in QB -- we bought it and have a considerable investment in moving our accounting to it, but calling this a "Nonprofit Version" is really misleading.  If we knew what problems we'd have, we'd probably have found a different package.

QuickBooks Team

Re: Handling equity accounts

Hi there, @NinaCampfield.

 

I appreciate you for taking the time in writing here in the community. I'm here to help you sort out your Equity accounts concerns. 

 

  1. For your number one question, you can follow the recommendations posted by @qbteachmt which is quoted as the best answer.
  2. To accurately track this type of transaction, I'd recommend you contact an accountant. They can guide and help you decide whether the check you write to transfer the donations is treated as an expense or write it against the Net Asset account. 
  3. To view the balance in Net Assets by class, you can run the Balance Sheet by Class report and customize.

Read through our help article: Customize reports in QuickBooks Desktop. It'll help you customize and filter your reports to fit your business needs.

 

For additional help, you can also contact our Customer Care support. 

 

Feel free to message us again if you have anything in mind about QuickBooks. We're always delighted to help. 


 

Community Explorer **

Re: Handling equity accounts

The article on "customizing reports in QB" is about income and expense reports, not the balance sheet.  The Statement of Financial Position/Balance sheet does NOT have an option to show amounts by Class across the top.  I went to Custom Reports and tried a Summary.  Had to use the "multiple accounts" option -- but then got the message that the report is designed for income and expense accounts only and since none were selected the report was blank.  If I'm doing something wrong, I would sure appreciate hearing about it.

QuickBooks Team

Re: Handling equity accounts

The custom report you pulled up will show up income/expenses which only generates Profit and Loss report. 

 

Let's pull up a Balance Sheet report instead, then customize to include Assets, Liability, Equity, and Class. Here's how: 

 

  1. Go to the Reports menu.
  2. Select Company and Financial, then choose Balance Sheet by Class report
  3. Click the Customize Report button. Select the Filter tab.
  4. In the Account filter, choose Multiple Accounts and mark the accounts you want to view. 
  5. Click OK.
  6.  In the Class filter, choose Multiple Classes and mark the class you want to view. 
  7. Click OK

This report will generate and lets you view the balance in Net Assets by class. Learn about how to memorize reports in QB Desktop. This help article guides you to save your reports with its current customization settings.

 

I'd be glad to know how it goes, @NinaCampfield. I'd be always around to further assist. 

Community Explorer **

Re: Handling equity accounts

Hello Katherinejoyce,

 

Balance sheet by class is a report I wasn’t familiar with, and I'm glad to see it – I wonder why it isn’t in with the Nonprofit reports.  (I tried the Custom reports because that was a suggestion earlier in this thread, I recognized that they were income statement only.) I printed the Balance sheet by class, but as I was warned in the dialog box, the results are very strange, for example, different amounts in the asset vs. equity accounts for a single class.  Going back to enter classes for the entries in “unclassified” is going to be a huge task, since my beginning balances were entered by Journal Entry from the previous software!  I can't figure out how so many entries are unclassified since we have been using classes since we transferred the accounting to QB.

 

The description of how to make this report correct is difficult to understand, I wonder if you could help with that?  The only entries in the Net Assets accounts are those I have entered directly.  And, I have donations entered as a particular subclass, but on the Balance sheet they show up in the parent class only.  I checked the entry, and it looks correct to me.

 

I would appreciate any further help you can provide!

 

Nina Campfield

Community Explorer **

Re: Handling equity accounts

A further question regarding nonprofits . . . even though QB has a few actions specified for nonprofits, the reports still use for-profit titles.  Balance Sheet and Income Statement are not used in nonprofit accounting, nor is Cost of Goods Sold.  In order to provide correct financial statements, I have to export the report to excel, and manually change the name and titles.  Also, even though nonprofits are required to have restricted and unrestricted net assets, there is no obvious way to use these accounts once they are set up.  How does one request that QB make these changes, since they are selling this as a version specifically for nonprofits, and all nonprofits have the same accounting requirements?

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