Collecting money for an honorarium

TomInAiken · ‎February 21, 2019

We are a nonprofit community singing group and I'm (almost) a newbie with QBO - so please be kind. I just inherited being the Treasurer and wanted to convert from the previous system that used a combination of Quicken and shoe boxes to handle the books. So, I purchased a subscription to QBO from TechSoup, created several banking accounts and connected them to our bank, created a Chart of Accounts, Vendors, Donors and Service/Product lists. I've posted all the transactions since the conversion date (Jan 1, 2019) and things are looking good. Until today, that is.

One of our members recently lost her mom and we want to make a sympathy gift to her church. We've asked anyone who wants to contribute to make checks out to our organization. I'm expecting a boat load of checks and cash to come my way for the collection. When all contributions are in, I then want to deposit the money and write a check for everything that has been collected.

I believe I need to set up a wash or clearing account that could be used to exclude this collection and payment from being considered as an income or expense on our P&L report? If I define a new bank account (let's call it Gifting) and Collections-In and Collections-Out as income and expense accounts respectively, how do I actually get the monies correctly entered? Journal entries? Am I approaching this correctly or is there some easier way to do it?

--Tom

qbteachmt · ‎February 22, 2019

Even though it is written for QB Desktop, I recommend the book Running QB for Not For Profits, by Kathy Ivens, to learn about the Data flow you need to be using.

I disagree with Liability accounting. Let's review that you Asked for Donations. The people are writing their checks and giving to your organization. What you have is a Restricted Purpose. This is Income for you. If you wanted it not to be income to you, you collect them as Payable to the Church.

For This: "that could be used to exclude this collection and payment from being considered as an income or expense on our P&L report?"

You will use an income and expense activity, since it is all Payable to you.

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john-pero · ‎February 22, 2019

You do not need a clearing account to wash these funds but a liability account for the "project" and as funds come in and are deposited you post them in the liability and when dispersed you reduce the liability.

Create a service item that will post to the dedicated liability account in sales receipts which will serve as receipt of money and then you deposit it into a bank account. A separate trust bank account would be appropriate if you do this often but probably not necessary for one off.

A thought to consider, since 100% of the funds are going to the church you should present the church with a list of donors so that the church and not you would issue donation receipts required for tax deduction. You may very well be non profit but that does not always mean money given to you is considered a charitable deduction

qbteachmt · ‎February 22, 2019

Even though it is written for QB Desktop, I recommend the book Running QB for Not For Profits, by Kathy Ivens, to learn about the Data flow you need to be using.

I disagree with Liability accounting. Let's review that you Asked for Donations. The people are writing their checks and giving to your organization. What you have is a Restricted Purpose. This is Income for you. If you wanted it not to be income to you, you collect them as Payable to the Church.

For This: "that could be used to exclude this collection and payment from being considered as an income or expense on our P&L report?"

You will use an income and expense activity, since it is all Payable to you.

TomInAiken · ‎February 24, 2019

Thank you for the response. Makes sense to treat the collected money as Restricted Funds.

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Collecting money for an honorarium