Accounting and Tracking of a Scholarship Fund

Additional information:

Our organization hands out the scholarships.  The “donations” come from players within our program that had a credit on their account that they chose to donate to the org so the funds are already in our possession and just need to be reclassified

I'm glad to see you here in the Community, @youthhockey.

Let me guide you on how to track fund donations you received via credit card, bank transfer, or cash in QuickBooks Online.

To start, we'll need tocreate a revenue account for fund donations. This way, you can track the money you receive from donors.

Since you already receive the donation, you can record it as a sales receipt. Take note that when creating a sales receipt, you'll need to select or make a non-inventory item.

To create sales receipts, here's how:

1. Go to the + New button.
2. Choose the Sales receipt option.
3. Select the Customer or the name of the donor.
4. Enter all sales information needed to complete the sales receipt.
5. Once done, click the Save button.

With regards to class tracking the transaction, you can use the feature accessible in QuickBooks Online Plus and Advance by turning it on for the P&L class to be automatically available. 

I've added this article that can guide you more in recording donations or charitable contributions in QuickBooks Online.

Let me know if you have further concerns. I'd be glad to help you out. Have a pleasant day.

@Rubielyn_J 

To follow up on this question - how would one record a scholarship that is paid out to a student? My org decided to award two $500 scholarships for study abroad programs and I'm not sure how to classify them as an expense. Any help would be appreciated!

Following...do they invoice us? Are they an employee (T4A needed)?

Hi Terric,

I can see how important it is to get the details right for this kind of situation. This thread is a part of our US QuickBooks Community, but my colleagues have brought me in since you've mentioned T4As, which are a Canadian form. I'm here to help steer you in the right direction for handling situations with scholarships and donations to make sure you're meeting the Canadian requirements for these instances.

To start, I'd like to make sure you have a copy of the Canadian Community article for recording donations and charitable contributions, just in case you need it. There are some differences between the US and Canada versions of QuickBooks Online, so it's ideal to make sure you're looking at a Canadian version of a resource. Here's the article: How to record donations or charitable contributions

As for whether someone invoices you, is a supplier (which is how Canada's QuickBooks Online tracks T4As), or needs to be set up as an employee, those are questions I recommend you direct to the CRA or even an accountant. The QuickBooks Team has the knowledge about how to use the features in the program, however, what transactions you need and how or whether they should be recorded is something we leave to people like accountants.

Luckily, QuickBooks Online makes it easy to work with an accountant. The My Accountant tab offers you the option to add someone you're already working with as a user in your books or you can use the Find a pro to help button to research accountants near you. That button is a great asset because each accountant you'll come across is QuickBooks-certified, meaning they're familiar with the ins and outs of the software.

Wishing you the best with these tasks!

Thank you. I've read through those. BTW I have QB desktop and there may be some differences in process. 

I'm happy to help. Thanks for clarifying that you're using QuickBooks Desktop. In that case, I'd like to direct you to the in-product help articles where you can search for steps on how to record donations and other such things. Here's how you find those articles.

1. Select Help from the top menu.
2. Choose QuickBooks Desktop Help.
3. Select the Help tab.
4. Click Search.
5. Type in your keywords and hit Enter.
6. Select an article to read through it.

Canada's QuickBooks Community is definitely still a resource you can use, and there are step-by-step articles for QuickBooks Desktop as well if you'd like to search there, too. QuickBooks Desktop's built-in help section is just another great resource to add to your arsenal.

As for connecting with an accountant when you're using QuickBooks Desktop, check out our Find an Accountant page. This leads to the same place as the Find a pro to help button I mentioned, but in a webpage format.

I'll be here should you have more questions. :)

Hi, my situation is similar but different. I use QBO, my client is a nonprofit preschool that receives donations for scholarship. How do we track that in a scholarship fund? And how do we apply the scholarship to a kid who becomes a student at the school. so how do we record the initial reciept of scholarship donation, and how do we take it out of the scholarship fund and apply to tuition income? Thanks.

Welcome to the Community space, @akinofe.

I’ll assist you with your above-mentioned concerns in QuickBooks Online (QBO).

We can create a Bank account in the Chart of Accounts to track a scholarship fund in QBO. I’ll show you how:

1. Go to the Gear icon, and select Chart of Accounts.
2. Click the New button to create a new account.
3. Choose Banks, under the New Account window or New Category.
4. Complete the necessary details to finish creating the account. Then, click Save.

Then, let’s write a check to apply the scholarship funds to who becomes a student in the School. Follow the steps outlined below:

1. Click the + New button.
2. Under Vendors, select Check.
3. In the Payee dropdown select the name of your client who receives the donations for scholarships.
   If your client is not yet added as your vendor, go to this article for detailed steps: Add a vendor in QuickBooks Online
4. From the Bank account dropdown, select the same bank account you created for withdrawing the money.
5. Complete the fields needed, and select Save and close or Save and New.

Moreover, we can create either a bank deposit, sales receipt, or invoice to record the initial receipt of the scholarship donation. Also, you can write another check to take out the amount of the scholarship fund to apply for the tuition fee.

On the other hand, you can also follow the Recording a retainer or deposit process in this transaction. 

Nonetheless, I still highly recommend you consult your accountant for experts’ advice and ensure that your books are accurate.

Furthermore, I’m adding this article for your reference when categorizing and matching transactions and reconciling your account in QuickBooks Online.

Let me know if you have questions regarding tracking funds in QuickBooks. I’ll make sure to get back as soon as I can. Stay safe! 

Thank you @RoseJillB for your detailed explanation. I do have one clarification question. I see how to record the initial scholarship donation into a retainer account. [By the way we do have a bank account created just for the scholarship fund]. I do understand writing a check to take the scholarship amount out  of the retainer account. But I don't yet understand how that amount of scholarship taken out of the retainer account becomes tuition Income?

This is important becomes some students will only get say 60% scholarship, and will pay the other 40% of the tuition income themselves. There will be an actual transfer of money from the scholarship bank account to the checking account for the student who receives scholarship.

So, again how do I get to record in the tuition income account, (P&L)  taken out from the retainer account.

@RoseJillB I think I found the answer in the article on Recording a retainer or Deposit. I think the answer is found in Step 5 - turn a retainer into credits on invoices. Thank you, and dont bother to respond to my previous post. This question is now satisfies. I think we can mark this solved. Thanks again.

I appreciate you getting back to us and for acknowledging my colleague’s explanation, @akinofe. I’ll share further clarification as to why the tuition account will be taken from the retainer account.

A retainer is a fee that is paid in advance in order to hold services. In your case, it’s the donation you received. It’s like an upfront payment from your client for the kid that will become a student later on.

It’s considered as liability at first since the kid haven't benefited from those services yet. Once complete, you’ll need to create an invoice for your customer and then turn the retainers into credits on invoices. At this time, the 60% of the amount from your retainer account will be transferred into income account. 

To clarify, you are not obligated to report payments received if they are clearly indicated to be refunded to the client and cannot be kept by you once you deliver the goods and services you promised. However, if the payments are simply advance payments for later-provided goods and services, they are considered income.

I highly suggest contacting your accountant if you have any queries about these instances. They can also explain it to you in a simpler way to help you understand it better.

I’ve included these resources to guide you through reviewing the transactions and balancing your book:

• Categorize and match online bank transactions
• Reconcile an account in QuickBooks Online

Feel free to drop a comment below if you have other questions about the retainer account. I'll help you out as soon as I can. Have a great day!