(church) fund accounting

I'll share information about Fund Accounting for non-profits and how to track funds in QuickBooks Online.

Fund accounting is essential for non-profit organizations to track and manage their financial resources in a way that ensures transparency and compliance with donor restrictions. QuickBooks Online can be used for fund accounting by setting up classes or locations to segregate funds and transactions. 

To be able to see the Class field on relevant forms that let you identify the class associated with different transactions, please follow these steps in turning on Class tracking:

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

Then you can now set up a class for each fund. Here's how:

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

For detailed information, refer to this article: Fund Accounting for non-profits in QuickBooks Online.

I also suggest reviewing the plans and pricing on which product will work best for your company. Check out this link: https://quickbooks.intuit.com/pricing/. 

You can visit this article you can use in the future: Track funds you receive from donors in QuickBooks Online.

Feel free to post here again if you have further QuickBooks-related concerns. We are available 24/7 to lend a hand with each of your queries. Stay safe!

Thank you for the information about setting up QBO to handle fund accounting. What I am looking for is feedback from users about how it is working for them.

Works well for Profit and Loss purposes but as far as Balance Sheet is concerned, useless. Only way of tracking the balance of a fund is by running an All Dates P&L and that's assuming you had no opening balances.

Thanks for your response (and apologies for taking so long to get back to you). That is helpful. I will continue to experiment.

I'm happy that my colleague was able to provide the solution you require, @laurakan.  

We are still here if you need more guide in the future. Have a great day!

I work for four churches that use QBO and fund accounting. Two of them set up the funds as liability accounts, and then all of the revenue and expenses are on the liability accounts. The fund balances then show on the balance sheet and we run the register on the liability account to view activity detail. The activity does not show on the statement of activity for the operating fund, which is how we want it.

The third one uses the same method as the other two except that one of the funds is for a large ministry program with its own budget. In this case, the liability account basically serves as a reserve fund for this ministry. We also have a class for the ministry so that we can run typical activity and budget reports on it. 

At the fourth church, these funds are set up as equity accounts and there is also a class for each fund. It's a huge complex mess. There are 20 funds and thus 20 classes. We don't run the activity report by class because it would just be too much detail and the board wouldn't be able to manage it. The bad thing about this is that there is no way for them to easily see whether specific expenses were on the operating account or not. If the priest buys expensive new vestments with money from the altar guild fund, this shows on the statement of activity, which is not what we want. At the end of the year, the statement of activity by class gets run and then journal entries are made to adjust the fund balances. I think this is not a good way to do it. 

All of these methods were developed by CPAs.

That's interesting to set up the funds as liability accounts. What is the rationale behind that, and how do you set up the income and expenses? Are they entered as asset and liability, respectively? I can't quite wrap my head around how to do this. Thanks!

The person who set it up just felt that liability accounts were the most suitable option for funds with restricted uses. The activity is tracked by using the liability as the account that is debited and credited for expenses and income (instead of expense and income accounts). We use the register as a report of the activity.

Only thing with that approach is that some of the income and expenses may well have to be shown as such in the accounts. I'm writing from the UK but it's probably not too different where you are. I know it as "revenue recognition", the question whether something has to be shown as income for the church or organisation or not.

That is interesting. I still can't quite picture how it would all play out, and that and comments from others make me think QBO would not be the solution for this client. That's a bummer, because their current software (ChurchWindows) has horrible custom reporting, and TechSoup gives an amazing discount on QBO to NPO's. I could save my client a ton of money, but not at the cost of my sanity.

Thanks for your feedback. It's really useful and saved me from losing years off my life trying to make QBO work for them!

I used Church Windows for years. Fund accounting was the one thing it was good for. Although QBO is not ideal (and really I'm ready to get rid of it for other reasons), I've found it easier than Church Windows.