Background: We are a nonprofit that helps local governments raise funds for trail building. We collected donations through an online portal (which came to our checking account via an ACH transaction) and also checks mailed to us. We booked these donations, which totaled $8,405 as a short-term liability we will just call TAP Donations. We had also pledged $2,000 of matching funds for that drive which we had raised in a separate method previously specifically for the purpose of incentivizing the aforementioned fund drive. Our financial agreement with the local government entailed a 15% administrative fee for all funds raised — to cover our expenses of running this drive (we do not apply that to the matching funds we had previously secured). Our earned income from the donations totaled $1,260.75. The net amount (donations - our fee + our pledged match) was $9,144.25, which I informed the local government partner to invoice us for. They did and we remitted the funds.
However, I wanted to double-check how I should enter the check. It is tempting but I suspect incorrect to enter the splits using the short-term liability account, an expense account to track the payout of matching funds, and an earned income account with a negative value (see attached screenshot). It indeed made the liability account balance go away and the payout expense and earned income account balances go up, but I'm concerned this was not the right way to do this. Can anyone please advise? Thanks in advance.
