Non-profit / charity / fund accounting, example help, please

[Mike or Penny Novack]

>
> For people using gnc for personal or business accounting and wondering 
> what this is all about there is some apparent weirdness in this type 
> of accounting, for e.g. if someone gives you money it may be a 
> liability rather than an asset and other non-intuitive and 
> entertaining stuff :)
>
Look, this is a perfect example of the problem not being with gnucash 
but with understanding the fundamentals of accounting for your sort of 
entity (mine too, I am the treasurer of non-profits and use gnucash for 
the purpose).

You are speaking of "restricted donations" of course. Well let's see if 
we can't correct how you think about that.

If you receive a restricted donation (can only be used for some 
specified purpose) then it IS both an asset and a liability. What it 
isn't, is currently available donation income. When you spend some 
assets pay for an expense that the restricted funds were qualified to be 
used for this purpose you can initially treat that normally (credit 
checking, debit expense account). Every so often, monthly, quarterly, or 
annually as you prefer* (or are required by your jurisdiction) you can 
enter an adjustment transaction whose amount would be the total for that 
period of this qualifying expense -- debit the liability ("donor 
restricted funds") and credit the special income account ("funds freed 
from restriction"). OR, if your jurisdiction requires a different 
process then do whatever that might be (I don't know UK regulations for 
non-profits).

The point I am making is that NONE of that has anything to do with 
gnucash. Nor is special things like this limited to non-profits. Can't 
expect the poor gnucash developers to be providing ACCOUNTING examples 
for every possible sort of entity, so they quite reasonably did just 
"personal" and "sole proprietorships". Well partnerships have "weird 
things" like "drawing accounts" under liabilities and corporations, well 
let's not go into all the possible special things that might be required 
for things like "treasury stock", etc.

Please, if you are trying to keep the books for something more 
complicated than personal or sole proprietorship get yourself the 
necessary accounting books or get professional accounting help.

Michael D Novack, FLMI

* If you insist on keeping this current as you go (say your bylaws 
require that or your oversight person requires that) you CAN do that 
using a split transaction. But this is messy, and you need to be careful 
as error prone. I do something like this for one of my non-profits as we 
buy books, some of which we give away and some of which we sell (and for 
the US I need to be able to report "sales" and "cost of goods sold"). So 
when I enter a transaction recording the sale of a book I am debiting 
cash and cost of goods sold and crediting sales and unallocated books 
(simpler when given away, then it's debit books donated and crediting 
unallocated books). In our case books are immediately expensed 
"unallocated", not an inventory asset, as this is incidental to our main 
activities. But like I said, entering two way split transactions is tricky.