Frequently Asked Questions

about Processing

These are some of the most commonly asked questions about relevant to Churches.
If you can’t see an answer to your question, please feel free to contact us and we’ll be happy to help.

Q:  How do we allocate the deposit paid for the purchase of a property?  

I suggest the parish should just show the deposit under Other non-current assets 1-4000.

On settlement you should reverse the deposit and take up the full cost of the new property, probably all under Land 1-31xx (at cost) as an interim arrangement. In due course the parish will then need to reverse this single ‘cost’ entry and replace it with the UCV (in 1-31xx) and the insurance replacement valuation (in 1-32xx) when this information becomes available, plus a revaluation adjustment which impacts 3-3100.”

Please also be careful about the GST:
If you are planning to rent the property for more than 75% of the GST-inclusive market value of the accommodation, then the income & expenses relating to that property are Input Taxed. This means you do not charge GST and you cannot claim the GST that you pay.
If you are planning to rent the property for less than 75% of the GST-inclusive market value of the accommodation, then the income & expenses relating to that property are GST Free. This means you do not charge GST and you can claim the GST that you pay.

See this link for more information: https://www.ato.gov.au/non-profit/your-organisation/gst/gst-concessions/#noncommercialactivities

Q.  How do we process gifts and donations and received for specified purposes, called “Restricted Funds”.

There are accounting standards to be followed to ensure the that current accounts reflect the actual receiving and appropriation of monies in the current period, as well as utilising funds specified in prior periods.

Accounting Procedures
1. When money is received for a restricted purpose
Allocate the Gift/Donation to the appropriate Income account, with a note/memo that it is for the Restricted Fund.
Accounts to 4-1310, 4-1320 or 4-1330.  This is just the normal entry when money is received.

2. Transfer the Gift Amounts to Restricted Funds Allocation
The transfer identifies that there are Gifts received in the General Income that are “restricted” and not available for general budget expenses.  This is a new entry that can be done as each amount is received into Gifts Income 4-1310, 4-1320 or 4-1330, or it could be done monthly, or annually. The $ amount must match the credit to Gifts in the previous entry. Recommended “at the time” or monthly, not annually

3. When money is spent for a restricted purpose
Allocate the spending to the expense or asset as per the “restriction” on the Fund, ie the designated or intended use of the gift/donation
This is just the normal entry when money is spent.

4. Appropriation of the restricted fund
Appropriate Funds to the spending that has happened for the “restricted purpose”, such as build or a new staff person
This entry can be done as each spending is entered and allocated, or it could be done monthly, or annually. The $ amount must match the debit in the previous entry. Recommended “at the time” or monthly, not annually.

Recommended “at the time” or monthly, rather than annually because any interim P&L and Balance Sheet reports will be distorted by the movements in the Gifts and/or the Restricted Funds
Note about GST

GST is taken-up at the time of the spending transactions, and does not affect the Funds accounts

 

© Benkorp Management Services 2018

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