How do you properly record accounts for Donations & Scholarship Accounts?
You need to provide a little more detail as to the flow.
Are the donations kept as capital and the income used as scholarship or are the donations the scholarship
But I am guessing the earnings/donations are centrally collected and then re-distributed on some basis.
If its initial recorded as income or not will depend on local taxation requirements and or the terms of the donation programme. I am assuming that the donors could be getting a tax deduction for their donation.
Even if its initial allocation is income, it can then be transferred out via an expense account to a BS scholarship liability account so the impact on the P&L is zilch
For the scholarships to be paid out against the students accounts they need to be allocated there in the first place and that would be done via Journal - transfer from the scholarship liability account to the student accounts.
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Let says, the funds $50,0000 collected by the church, and the church issues this scholarship funds for the needy students. We allocate the funds solely for this purpose. And we do have about 100 students qualified for the scholarship. 50 students qualified with fixed amount $500 annually. The other 50 students, the funds are used to subsidise/ top-up their tuition fees monthly (eg. The tuition fee is $1000, but the student only affords to pay $300. the scholarship covers the remainder $700). According to this flow, how would you allocate the funds against the students’ account? Btw, we used the sales invoice as our billing reminder.
Ok, being a church, I am going to assume that you are tax exempt, so for now we will leave all tax considerations in the bottom draw. You don’t say but I am also going to assume that when you invoice the tuition fees - these get taken up as P&L Income.
Therefore for a Customer: Accounts Receivable - Student A = +1000 and P&L - Tuition Fees = -1000.
The donations would be banked to BS Liability account - Scholarship (Tuition Fees)
To allocate a scholarship to a student you would use a Journal:
Debit - Scholarship (Tuition Fees) - 500
Credit - Accounts Receivable - Student A - (Invoice optional) - 500
To do a group of students the Journal would be:
Debit - Scholarship (Tuition Fees) - nnnnn
Credit - Accounts Receivable - Student A - (Invoice optional) - 500
Credit - Accounts Receivable - Student B - (Invoice optional) - 500
Credit - Accounts Receivable - Student C - (Invoice optional) - 500
Rather then have one large Journal, they could be broken down into classes or years, this way as a group passes through the school, that Journal can be cloned rather then being continually edited.