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Fund Accounting for non-profits in QuickBooks Online

by Intuit Updated 2 months ago

Learn about Fund Accounting for non-profits and how to track funds in QuickBooks Online.

Fund Accounting is an accounting method used by non-profits in which funds are allocated to expenses before the money is actually spent. When the fund is empty, the accounting system doesn't allow any more spending against the fund.

When using Fund Accounting in QuickBooks Online, you can use Class tracking and banking sub-accounts to track individual funds.

In this article, we'll explain how Fund Accounting works with non-profits and the steps necessary to take to track the funds in QuickBooks Online.

Fund Accounting and non-profits

Any tax-exempt organization that meets Section 501 of the United States Internal Revenue Code is a non-profit Fund Accounting operation. Non-profits are required to divide financial information among a variety of categories, or funds, and use standardized non-profit reports to report on those funds.

These funds have restrictions on the use of resources. The funds are used to measure the revenues and expenditures arising from particular activities. Each organization is responsible for the proper collection, disbursement and control of all money relative to the funds the organization receives.

Fund Accounting and municipalities

Municipalities are regulated by Governmental Accounting Standards Board (GASB) 34 regulations, which are new to many cities — depending on size — in the last few years.

These new regulations require more stringent inventory of assets. If you're a municipality consider using the desktop version of QuickBooks Premier Non-Profit to ensure compliance with those regulations. QuickBooks Online is better-suited for non-profits that don't have these more stringent inventory requirements.

Step 1: Turn on Class tracking

  1. Go to Settings Settings gear icon., then select Account and settings.
  2. Select Advanced.
  3. In the Categories section, select edit ✎.
  4. Turn on Track classes.
  5. Select Save.
  6. Select Done.

Now you'll see the Class field on relevant forms that lets you identify the class associated with different transactions.

Step 2: Set up a Class for each fund

You can set up a separate Class for each fund to track separately.

  1. Go to Settings ⚙, then select All lists.
  2. Select Classes.
  3. Select New, then enter the name of a fund in the Name field.
  4. Select Save.

Repeat these steps for each of the funds you need to track.

When you enter fund transactions, you can now select the appropriate fund in the Class field for the income or expense line affected.

Step 3: Track multiple funds with bank sub-accounts

If you have multiple funds, you can have the total for all the funds recorded to a single bank account on your Chart of Accounts, but have multiple sub-accounts to track individual funds.

You can set up a different sub-account for each fund to track. Every transaction you link to one of the sub-accounts you create is reflected in the parent account.

To set up sub-accounts:

  1. Go to Transactions, then Chart of accounts (Take me there).
  2. Select New and do one of the following depending on which panel you see.
  1. Select Banks.
  2. Select the Save account under ▼ dropdown to choose Bank Accounts.
  3. In the Tax form section ▼ dropdown, select Checking.
  4. Enter the fund name in the Account name field.
  5. Select Starting date and opening balance to add that information.
  6. Select Save.
  1. Enter the fun name in the Category name field.
  2. Select the Select category link and select Bank & credit cards.
  3. Select the ▼ dropdown in the Account type field and select Checking.
  4. Enter the opening balance for this fund account.
  5. Select Save.

When you record deposits and withdrawals from these funds, be sure to identify the specific sub-account as the bank account to be affected.

Step 4: Run a Profit and Loss report by class

Now that everything is set up, you can run Profit and Loss reports by Class to review fund income and expenses.

  1. Go to Transactions, then select Reports (Take me there).
  2. Search for and select Profit and Loss by Class. The report reflects the current fiscal year's numbers.
  3. Select All Dates from the Report period dropdown list to review the total income or expense for the entire life of the fund.
  4. Select Run Report.
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