Using Classes when Inputting Beginning Balances
With many churches and nonprofits starting a new fiscal year on July 1, I often get questions regarding entering the beginning balances for a new accounting system. If you are using QuickBooks, it is important to get the classes correct with these beginning balances. Earlier this year, I wrote up the following for Vickey Boatright of Freechurchaccounting.com to help her readers. I'm posting it here in hopes it will be helpful to anyone setting up their system in July.
Using the Class function is necessary in QuickBooks to track funds and programs.You should set up each the programs you wish to track as a class.QuickBooks does not number them, so I like to put numbers in front of the name to keep the unrestricted grouped together and the restricted grouped together (i.e. 100 Admin, 200 Worship, 920 Temp Restricted, etc.)
Funds you need to specifically track should also be given a class.If someone donates money which the income is to keep the cemetery maintained, you will need to set this up as a restricted fund, by assigning it a restricted class.Use the subclasses below the restricted class to identify each fund (i.e. 920 Temp Restricted:922 Cemetery Fund).
When entering your beginning balances, most of the items will probably be assigned to the general fund or unrestricted fund.You don't need to worry about program funds here, as they are used on the expense side, not the balance sheet.Any assets (money market accounts, buildings, etc.) that are related to a restricted fund would have the specific restricted class on the line item.
Here is an example from my book, QuickBooks for Churches and Other Religious Organizations.
In the example, the building was purchased with a money donated as a permanently restricted fund.The building cost $100,000 so it was recorded in account 1520 Building with a class of Permanently Restricted Fund.The related mortgage and accumulated depreciation were also recorded to the Permanently Restricted Fund.This leaves $10,000 ($100,000-$70,000 mortgage -$20,000 depreciation) to be credited to the 3300 Perm. Restricted Net Asset Account with the 930 Permanently Restricted Fund.
This example is for a church, but the same concepts are used for other nonprofits.