[GNC] Where would enter revenue that could be paid to shareholders?

[Michael or Penny Novack]

On 12/5/2021 7:19 AM, Michael Hendry wrote:
> On 5 Dec 2021, at 11:39, Dr. David Kirkby <drkirkby at kirkbymicrowave.co.uk> wrote:
>
> If a company can potentially pay out X pounds, but has not paid out any at
> all, where would that be entered in GnuCash? I assume its a liability, but
> should it be entered into liabilities, or perhaps retained earnings?
> I’m not an accountant.
>
> I keep the books for a couple of charities, one of which receives donations which the donor has ear-marked for a particular purpose which might not come up in the same financial year.
> I thought it would be a good idea to record this as a liability, which would survive the year-end and remind the trustees that there was a sum which  could only be spent for that purpose, but I was hauled up by the accountant who examines our records for the charities register, and had to abandon that method.
You should probably get professional advice…
> Regards,
>
> Michael

Michael, you are describing something else, the "restricted funds" of a 
non-profit. And the what you describe is indeed one of the approved ways 
of dealing with that, especially when there are not separate bank 
accounts for the restricted funds. Always treated as a liability if 
legally restricted funds, usually treated as a liability if "hard" 
restricted << would need to ask the donor before using for something 
else >>, and sometimes even when a "soft" restriction << the donor 
specifies something like "I'd like this to be used for X but if you 
really have to can use for something else" >>

I think what we were actually being asked about was a "contingent 
liability" << say the matter was under adjudication and no way of 
knowing what the ruling will turn out to be be >>

CONSULT YOUR ACCOUNTANT ON THIS. My guess is that it will call not only 
for particular treatment but an annotation on the Balance Sheet 
explaining the special situation.

Michael D Novack