Accounting Question

[Paul Schwartz]

________________________________
From: Mark Phillips <mark at phillipsmarketing.biz>
To: Gnucash Users <gnucash-user at gnucash.org>
Sent: Tue, February 1, 2011 6:15:08 PM
Subject: Accounting Question

I run a US not for profit 501c3 on a cash basis. We are a club softball
organization with 2 teams. I reserve practice fields for the teams with the
local city government for about 4 months in advance. I pay nothing when the
contract is signed, because it is easier for the city to make changes to our
contract as time progresses (eg rain outs, we cancel a practice, add a
practice, etc.) and then bill me the exact amount used at the end of the
contract. I was wondering how to account for this.

1. I could just wait until the end of the contract and expense the field
rental out of the checking account. The problem with this is I want to make
sure I keep track of this liability for the corporation, and have enough to
pay the fee when the time comes.

How would i set up the accounts to (1) show the fact I have a future
obligation on my checking account, and (2) when I pay it, I have incurred an
expense?

*****************
an appropriate way to deal with this [it is called accrual accounting, I think] 
is to create a liability/expense pair when your usage event happens. then when 
you get the bill you take the cash out of your checking and balance it against 
the previously created liabilities.

IANAA but this could help.

Paul
****************
Thanks!

Mark
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