Our Nonprofit recently received an Endowment that will provide us with $150-200K annually in proceeds. I am on QBDT 2020 Premier Nonprofit Edition. What accounts do I need to set up to track this endowment? The funds are restricted. We will be investing 10% annually into an existing investment account. I'm thinking I need an Asset account, an Other Income account to record disbursements and an Other Expense account to track the money we invest. Does this sound correct?
Almost...but not quite. The endowment is received as restricted income. Depending on if the restriction is permanently or temporary you would need to classify as such. Permanently restricted donations cannot be spent. Temporary restricted donations can be spent provided you spend them on the named restricted expenses. If temporary and you spend them, you move them from temporary restricted to unrestricted and adjust your equity accounts accordingly.
As for investing, you just move money from one bank account to another. Any earnings would likely be unrestricted interest income.
QuickBooks does not provide proper financial statements for NFPs. When working with NFPs, I usually needed to export to Excel. Any temporarily restricted assets that were released from restriction show up as a negative income item with the same amount shown in unrestricted income.
I posted a question about recording endowments and haven't got an answer yet, so I thought I'd try replying to your post about endowments, since you seem to have a good grasp of this. Here's my question, in case you have the time and inclination to answer:
We received money to our bank account in late December 2020 for an endowment funded in early January 2021. During that interim period it was sitting in our bank, waiting to be moved by wire to Rose, the institution that is holding the endowment. I'm not entirely sure how to record this. Would this be the correct way to do it?
1. Receive that money in 2020 to a permanently restricted income account that we'll probably call Endowment.
2. Create an investment account in QuickBooks for Rose
3. Transfer the money in QuickBooks from our bank account to the investment account in 2021, still leaving it recorded under permanently restricted income.