Non-Profit Grant Accounting

Hello there, bob11x.

We can create a liability account that will serve as an income account of the item (service or non-inventory). To guide you further, please follow these steps:
 

1. Go to Accounting on the left panel.
2. Within the Chart of Accounts, click the New button at the upper-right corner.
3. Select Liability in the Account Type. 
4. Enter the account name. Then, Save.

Create or edit the existing item. Then, use the liability account you've created in the Income account field. Once done, you can now then create an invoice for these items by following these steps:

1. Go to the Project tab and select which specific project/customer you're working on.
2. Click the Add to Project drop-down. Then, choose the Invoice.
3. Choose the item you've created. Enter all necessary information.
4. Select Save and close.
   

Lastly, receive the payment from the Add to project drop-down, choose Receive payment, and select the invoice you've created.

For further guidance, it's best to consult your account to make sure everything is accurate and properly set up. Here are some articles for additional reference:

• Add product and service items.
• Learn how to set up your chart of accounts and add new accounts.

Let me know if you have other questions. Take care and stay safe!

Thank you for the quick reply.  This is how it works in for profit.  I just am not sure in non-profit though.  I am trying to get the accountant to understand my question better so he can tell me for sure.  I think the grant is considered restricted funds revenue according to the non profit structure but it needs to be a liability for quickbooks to record properly.

Well- come to find out the accountant does not know anything about quickbooks.  Like at all.

Can anyone tell me if the above solution is proper for a non-profit?  I can see it should work but do not want to screw up the reporting.

Thank you.

Hi there, bob11x.

Yes, you may wish to consider the steps provided by my colleague above to create a Liability account that will serve as your Income account for the item. 

I am also adding some links for future reference:

• Configure an account for a nonprofit organization
• Track funds you receive from donors in QuickBooks Online

Feel free to post again here if you have any other concerns.

It won't work this way.  By receiving the fund grant as a liability it does not show up in the Projects window.  So that puts me right back where I started except now my net assets are not accurate either.

It seems to me it is a flaw in the reporting by QBO.  Every video I have watched, and every link I have followed and every non-profit book I have read regarding projects show reporting expenses but never explicitly paying for programs themselves. Seems there must be a way??

Please see my post to her response.  It doesn't seem to work.

I appreciate you for coming back, bob11x. 

I understand that you've already watched and read some videos and articles about using a grant for program fees in Projects. However, it would be best to work with an accountant for professional advice in dealing with this type of situation to make sure everything is recorded accurately. 

You can also find an accountant by clicking on this link: Find an accountant.

To help you with the future task and tips when using QBO, you might want to visit our Help Articles.

I'll be right here if you have further questions. Keep safe and have a good one.

The organization has an accountant.  He doesn't know QBO well. 

I cannot believe that this is the only organization in the universe that uses grant funds for programing.  Someone somewhere should be able to chime in with a workable solution.

I am sure it is either easily doable and I am overlooking it or that it is not possible in this software.  I would still need a workaround that doesn't throw the books out of wack.

Anybody??

I am just guessing here, but have you tried setting the Grant up as a Customer/Vendor? When you receive funds for the grant, it would record as a payment to their account. As you use funds from the grant, you "invoice" but don't send.  That way you would see the balance decreasing as the funds are being used and the revenue is accounted for.  Let me know what you think.

What does "invoice but don't send do"-QBO is just recording invoices and the grant income will be doubled-I don't think this answers the question. 

Hi bob11x!  I'm having this exact problem tracking grants using online Quickbooks.  I'm the new bookkeeper for our local public library and I'm trying to untangle the tracking of restricted grants for our non-profit.  Were you ever able to solve this?  Any help appreciated!

Hi,

I found this blog post below in my research. I'm working on the same issue with restricted grants.  

https://qbochat.com/managing-restricted-grants-in-quickbooks-online/

Limitation: 1 project to 1 customer.   I will probably have to use a class parent as a program to handle multiple grants under a program.

After completing the nonprofit setup in QBO and setup grant donors as a customers. Create an invoice/pledge for the customer/project, receive payment against the invoice/pledge.

Kerstin,

No, I was not able to solve this.  They are keeping an Excel file of the specifics.  Kind of a pain but the only way we can see to do it.

Bob

From my understanding, restricted grants are unearned revenue and it is a liability (credit normal balance) and should not be on your P&L until conditions are met. For example, you received a grant in January of $10,000 and the condition is to pay salary and program expenses. In January, you incurred $5,000, in salary and programs expense. Then you would post journal entries at month-end to move the money from the unearned revenue account (debit) to the revenue account (credit). So in January, you would recognize $5,000 in revenue as opposed to $10,000. Hope this helps.

I saw this method of recording grants a sub customer or job (desktop or online). I have one question how do we account for restricted funds received?

Let me welcome you to the Community, @Orine. 

Allow me to walk you through the steps to properly account for funds restricted in QuickBooks Online. We can use the Class Tracking feature in QBO to manage it. Before you record your restricted funds, we need to do the following steps below to ensure we can easily track it.

1. Log into your QuickBooks Online. Also, you need to be a QBO Plus or Advanced subscriber to get this done with ease.
2. Set up ministry divisions as customers with restricted funds as projects responsible for spending and distribution.
3. Add a donation item to your products/services and map it to a revenue account in a chart of accounts.
4. To turn on the location tracking by following the steps: 

• Click the Gear icon and go to Accounts and Settings.
• Select the Advance tab and choose Categories. 
• Under Categories, turn on Track classes. 
• Hit Save and Done.

       5. Create a Net Assets account in your chart of accounts. 

• Without Donor Restrictions
  • General Fund - this is your operating money.
  • Board Designated Fund - this is your reserve money.
• With Donor Restrictions
  • Temp. Restricted Funds by Time/Purpose
  • Perm. Restricted Funds in Perpetuity

After following the steps above, we can now record the restricted funds you've received. Here's how:

1. Go to + New, under Customer, and select Sales Receipt. 
2. Add the necessary details needed. 
3. In the Class section, choose the Temp. Restricted Fund if it is temporarily restricted and choose Perm. Restricted Fund if it is restricted for life by the donor.
4. Click Save and close.

Here's an article on how to record and make bank deposits in your QBO to match your real-life bank deposits: Record and make bank deposits in QuickBooks Online.

Feel free to comment below if you have further questions regarding restricted funds in QBO. Here in Community, we are always ready to help.