Revenue or Liability? Disputable?

[Davc]

Is this correct?

upon deposit:
DR cash $700,000
CR deferred revenue $700,000

upon payment to homebuyer:
DR deferred revenue $10,000
CR cash $10,000

Add to the second entry:
Debit Expense
CR Program Service Revenue

[Davc]

may not be the best place to find non profit GAAP.

2006:
Dr Temporarily restricted funds
CR Program Service revenue

As spent

Dr. Program Service Expenses
Cr. Temporarily restricted funds.

There are actually some intermediate steps in this, and if you've never seen these account titles, welcome to the world of not for profits. There is much to learn and it's not like general business GAAP.

Doug

You might want to review your entries. In 2006 you have a negative fund balance and the cash is still not on the balance sheet. As you spend the deficit in the fund balance decreases.

[Snaggletooth]

Not-for-Profit

should not be a forbidden topic. Too many of us are confronted with accounting issues, and also many of us have to fill out 990s.

I believe if this agency is properly reporting on an accrual basis, the early receipt of HUD money should be deferred revenue (carried as a liability on the balance sheet). The entire thrust of non-profit reporting, ESPECIALLY for the 990 is the proper matching to revenues and expenditures. This includes buckets of funds which must be allocated to time such as government fiscal years.

The inescapable conclusion of proper "matching" is overwhelming when you encounter the reporting requirements of the 990. In addition, the 990 requires a balance sheet.

A small non-profit like a cemetery association can probably get away with cash basis, but anything tied to government money should be structured on an accrual basis so the amounts and time periods can be properly matched.

[BOB W]

may not be the best place to find non profit GAAP.

2006:
Dr Temporarily restricted funds
CR Program Service revenue

As spent

Dr. Program Service Expenses
Cr. Temporarily restricted funds.

There are actually some intermediate steps in this, and if you've never seen these account titles, welcome to the world of not for profits. There is much to learn and it's not like general business GAAP.

Doug

This makes total sense to me. Accrual Basis with special titles = Tax Accounting

[outwest]

A tax forum

may not be the best place to find non profit GAAP.

2006:
Dr Temporarily restricted funds
CR Program Service revenue

As spent

Dr. Program Service Expenses
Cr. Temporarily restricted funds.

There are actually some intermediate steps in this, and if you've never seen these account titles, welcome to the world of not for profits. There is much to learn and it's not like general business GAAP.

Doug

[ChEAr$]

You've got it right

"One man's debit is another man's credit."

[NPH]

Assuming you are accrual basis the consultant is correct. The money is both revenue and expenditure as it's paid out.

Is this correct?

upon deposit:
DR cash $700,000
CR deferred revenue $700,000

upon payment to homebuyer:
DR deferred revenue $10,000
CR cash $10,000

[Davc]

Assuming you are accrual basis the consultant is correct. The money is both revenue and expenditure as it's paid out.

[BOB W]

If....

... the only entry for a a year in the grant income, that is the only reportable item on the 990. In the following year, you report each disbursement as they happen, even if the year shows a deficit.

[JON]

I agree

with Bob. Grant income and then how is it spent.

Unregistered How do I get "private messages"?

[BOB W]

???????

My understanding of a non-profit organization is to account for all activity as a "Source and Application" of funds. Deferred Income???? NO. Sources of monies recieved and spent is reported just like Income and Expense Report. There is no profit or loss, just excess or deficit.

We are talking about a 990 aren't we?

[NPH]

Thanks

Consultant say this is deferred revenue.

Upon deposit
DR Cash &700,000
CR Deferred Revenue $700,000

[sandysea]

You would not debit revenue in a year in which revenue was not offset. In 2007 or thereafter when the funds are paid out for subsidies, you have an EXPENSE. You will credit the bank and debit the subsidy expense.

If this was a "deposit" paid by HUD to be held in escrow and not used for operating expenses, then when you received the 700K it should have been held in an interest bearing account and placed on the b/s as such.

You need to look at the agreement with HUD for how the monies will be expended to decide how to account for the initial funds....

[NPH]

We are nonprofit. We got an award letter from HUD for the homebuyer subsidy in the amount of $700,000 in October 2006. We received $700,000 subsidy funds for the homebuyers in January 2, 2007. We deposited it to the bank immediately. We will pay all of the fund $700,000 to homebuyers for the next 3 years. How can I record the journal entries?

My journal entries:

Upon award:

DR Acct Receivable: $700,000
CR Subsidy Revenue $700,000

Upon deposit:

DR Cash $700,000
CR Acct Receivable $700,000

Upon payment to each Homebuyers

DR Subsidy Revenue $10,000
CR Cash $10,000

Per consultant, this is liability, not revenue, but he does not want to correct the errors for us.

Would you help me to correct the errors? Thank you in advance.