Presentation on theme: "April 10, 2015. Purpose of Financial Reporting Assess Financial Condition Questions: How much money do we have? How much can we spend? Are we able to."— Presentation transcript:
Purpose of Financial Reporting Assess Financial Condition Questions: How much money do we have? How much can we spend? Are we able to give out scholarships this year? Can we afford this event? Compare Actual Results with the Budget Questions: Are we over budget? Were our estimates correct? Did we plan too few/many programs this year? Determine Compliance with Laws and Policy Questions: Did we spend funds in accordance with policy? Did we accurately report our revenue to the IRS? Evaluate Efficiency and Effectiveness Questions: Are we losing money on this program? Are we raising too much money? Are we spending too much? Are we meeting our operational goals? Do we need to do more fundraising or request donations? Accountability to Donors and Stakeholders Questions: Did we use donations as requested? Did we use funds to forward the UGA Extension mission? If our spending was shown to every donor would we be confident that each expense was appropriate?
Type of Accounts Assets Increase the value of an entity or benefit operations. Examples: Cash, checks, investments, gift cards, accounts receivables Liabilities (currently only to record credit card charges) An entity’s legal debts or obligations. Example: Credit card charges to state approved credit cards Equity (used only if you have certain investments) Amount of undistributed profits. Example: retained earnings, unrealized gains/losses Revenue (also called income) Incoming funds earned during the course of business Expenses Outgoing funds spent or incurred during course of business Contra-Revenue (Only for NSF check account) Deduction of revenue that does not increase expense
Double Entry Accounting Every transaction affects at least two accounts At least one account is debited and at least one account is credited Debit = left, Credit = right Total debits MUST equal total credits Example 1: You receive $250 from a donor and you make a deposit. An asset account is debited for $250 and a revenue account is credited for $250. Example 2: You write a $100 check for supplies. An expense account is debited for $100 and an asset account is credited for $100
Effects of Debits and Credits on Accounts Debits Credits Increase… Assets Expenses Decrease… Revenue Liabilities Equity Increase… Revenue Liabilities Equity Decrease… Assets Expenses
UGA Extension Basis of Accounting Cash Basis We want to track all funds raised, spent, and currently held in the county checking account, change funds, and investments Mostly concerned with assets, revenues, and expenses Revenues and Expenses are not closed to Retained Earnings at the end of accounting periods Unless you have change funds that you had before you started using QuickBooks Online, then the Retained Earnings (#3000) account should have a zero balance. Transaction Dates on reports must be set to “all dates” to see accurate balances on the profit and loss by class report
UGA Extension Accounting Equation Assets = Liabilities + Revenue – Expense Net Income = Revenue – Expense Example 1 from slide 4: 250 = 0 + 250 – 0 Example 2 from slide 4: -100 = 0 + 0 – 100 Total financial condition from both examples: 150 = 0 + 250 - 100 How is this used? If your only asset is your checking account and you have no liabilities and no investments, then your checking account register balance should equal the difference between your total revenues and expenses
UGA Extension Accounting Process: Identify the transaction through source documents, such as receipts, vouchers, and other documents You are encouraged, but not required, to scan these documents and attach them to the transaction in QuickBooks Online For expenses, attach the voucher and receipts For deposits, attach a copy of the receipts Record the transaction into QuickBooks Online Most commonly used functions are the check, expense, and make deposit functions All of these functions will affect at least two accounts Reconcile recorded transactions to bank and credit card statements Review reconciliations and trace back to source documents Tracing is the process of selecting an entry on a reconciliation and reviewing all underlying source documents. Run Reports
Classes Track the Revenue and Expenses for a program area (4-H, ANR, FACS) and/or a specific program (Cloverleaf camp, fundraisers, shooting sports, etc) If a class is a parent class and has a number of sub-classes, then you do not post transactions to the parent class. Example: 4-H is a parent class with sub-class camp. So transactions are placed into camp. However, if sub-class camp has sub-class Cloverleaf Camp (thus, a sub-class of a sub-class or a sub-sub class) under it, then you may not post transactions into camp. Always post transactions at the lowest level of sub-class unless given instructions to do otherwise Example: you want to move funds to from ANR to 4-H, but have not created the necessary classes yet, so you may temporarily move funds from ANR to the 4-H parent class. See Fiscal Compliance Reporting page for recommended class lists
Spot Checking Transactions Encourage specificity when entering transactions Golden Rule: encourage secretary or resource manager to record enough information that a 3 rd party, objective reviewer would fully understand the underlying event. Vouchers, receipts, and other documentation should be organized and easily available for you to perform your review You should not have to ask your secretary or resource manager to explain a QuickBooks Entry. It should have sufficient detail to understand the underlying transaction. Review the Guides for County Office Fiscal Management
Reviewing Checks in QB Online Run the Check Detail Report Use of checks: Primarily to record expenses Sometimes used for transfers between assets Example 1: You write a check from the checking account to GA 4-H Foundation for investing. Example 2: You write a check from the checking account to the change fund account for an off site fundraiser or an office change fund. Accounts used with checks: Primarily expense (#5000s) accounts If used for transfers then asset (#1000-2000s) accounts are used Accounts NOT used with checks: #4000 Revenue Accounts unless they have been given specific instructions to do so. Ensure that information on the check, voucher, and receipts match what was entered in QB Online. NOTE: The Expense function in QuickBooks is the same as checks, but is used to record expenses incurred directly to your bank or credit card account.
Reviewing Deposits in QB Online Run the Deposit Detail Report Use of deposits: Primarily to record revenue Sometimes used for transfers between assets If you collect funds off-site, then you will record change funds returned to checking account from the change fund account. Accounts used with deposits: Primarily revenue(#4000s) accounts If change funds are used then asset (#1000) accounts are used Accounts NOT used with deposits: #5000 Expense Accounts unless they have been given specific instructions to do so. Ensure that information on the receipts and bank receipt (or stamped deposit slip) match what was entered in QB Online.
Reviewing Bank Reconciliations Consult the Guide for County Office Fiscal Management Bank Reconciliations Purpose: Ensure that all transactions that affected the bank statement within a given time period are accurately and timely recorded into QuickBooks Online Policy Reference: County Operations County Funds Policy Sections Q, S, and T.1-2, Bank reconciliations should be timely and thoroughly reviewed each month
Journal Entries Makes direct changes to accounts Total Debits must equal total Credits Discouraged for daily transactions (instead use checks, expenses, or deposits) Primarily used for class transfers, bank errors, and moving funds to and from investment accounts. Class Transfers must have the same accounts selected with equal debits and credits with different classes. CEC should be aware of all journal entries made All journal entries on bank or credit card reconciliations should be reviewed
Journal Entry Examples Transfer Revenue between Classes Situation: The Extension Office raised $1200 from a fundraiser. The full amount was erroneously given to 4-H when it should have been evenly distributed among program areas. CEC requests that ANR and FACS received $400 each. Entry: Account Debit Credit Class 4050 Fund. $800 4-H 4050 Fund. $400 ANR 4050 Fund. $400 FACS Reason: to distribute fundraising revenues to appropriate program areas. Transfer Expenses Between Classes Situation: A check was written from 4- H for a $1000 equipment purchase. Half of the equipment was for ANR. CEC requests that $500 be applied to ANR. Entry: Account Debit Credit Class 5084 Eq. $5004-H:Eq 5084 Eq. $500ANR:Eq Reason: to distribute equipment expenses to appropriate program areas
Reviewing Credit Card Reconciliations Credit Card Reconciliations Purpose: To account for all charges made on state approved credit cards Policy Reference: County Operations County Funds Policy Sections K.1-2, R, S, T, and U. Bank reconciliation policies apply to credit card reconciliations regarding monthly reporting, timeliness of reporting, and thoroughness of reviews Credit Card reconciliations should be timely and thoroughly reviewed each month
Profit and Loss by Class Report: Program Area Balances Run report for “all dates” if you desire to see program area balances and/or specific class balances Under the “Total 4-H”, “Total ANR”, “Total FACs” columns, their net income is their balance. Trouble Shooting: Run P&L by class report for all dates and under the “Total” column, the net income line (bottom line) should equal your checking account register balance. If you have investments tracked as a class, then subtract the amount of investments that amount If not, then check change fund and retained earnings accounts for the discrepancy or call the fiscal compliance coordinator for assistance
Other Reports Company Snapshot & Balanced Scorecard Journal General Ledger Transaction Detail by Account Transaction List with Splits
Additional Resources All Training and Reference Documents are posted on the Fiscal Compliance Reporting webpage (link below): QuickBooks Online Videos: Accounts Receivable Basic QB Online Operations Budgets Change Funds Other Guides and References: Guides for County Office Fiscal Management CEC Best Management Practices CEC County Funds Policy Training Fiscal Compliance Reporting Page: http://www.caes.uga.edu/intranet/coextopr/fiscalcomp/inde x.html http://www.caes.uga.edu/intranet/coextopr/fiscalcomp/inde x.html