I am the treasurer of a non-profit fraternal association. At the start of our financial year, I will invoice our members for the payment of an annual membership fee (annual dues).
Some members like to pay a few years in advance so that their membership accounts are always in they are always in credit or in good standing.
To track the advanced payment of membership fees I have created a “service” called “Membership fees paid in advance”, with those funds tracked in a trust liability account called “Prepaid Subscriptions”.
When a member makes an advanced payment, I create a sales receipt and select the service listed as “Membership fees paid in advance” to ensure that the funds are recorded as a debit in the “Prepaid Subscriptions” trust liability account.
When the new financial year arrives, I raise an invoice for that year’s membership fee. I then create a new line on that invoice to select another service called “Prepaid subscription applied” and enter a negative amount to credit the trust liability account and to show a zero balance on the invoice, indicating that it has been paid.
In this way, the trust liability account should only show two types of transaction—(1) “Membership fees paid in advance” which increase the account balance; and (2) “Prepaid subscription applied” which decreases the account balance. The problem is that while those transactions are correctly shown in the trust liability account, several others are also shown there that should not be there. These are invoices for membership fees, which have yet to be paid, shown as in accounts receivable but why are they also showing in the trust liability account?
Please help to resolve this problem. Is it a glitch in the system? If so, it must be fixed.
With thanks.
