In fact the opposite, your above explanation about journal entry just adds to the confusion. So let me put your explanation back to you this way: You listed two transactions
Which you now claim aren’t based on a model, so what are they - just two arbitrary independent transactions which have no connection or relationship to each other.
Then from these supposedly independent, unconnected and unrelated transactions you extracted the Cr legs, just to fabricate a non-sensical Cr/Cr transaction.
That would be true if your example was referring to a journal entry, but it wasn’t, was it.
Note the “Cr Cash”, therefore your example was referring to a Cash Payment.
Yes, because you can’t do a payment transaction where the double entry can also be a credit.
Which of these:
(a) you can enter a cash payment with a journal entry, and / or
(b) the double entry of a cash payment can also be a credit.
I assumed this topic was about entry in Manager of businesses actives which effect businesses profit and loss however the activity is part of a specific owner / fund / capital account. So the balance sheet changes must be zero on retained earnings and instead effects the appropriate capital account.
Which results in 4 general ledger entries not the usual 2 in a double entry accounting system.
The committee of management of the club will have full discretionary power over the use of the funds that have been set aside for the disaster relief fund. Therefore, as previously stated the funds are not trust or agency funds. As such, they are reserves and are completely interchangeable with the retained earnings and are to be considered as part of the general retained earnings. Ideally they should be shown in the equity section of the balance sheet, not the liability section (I say ideally because some conventions only define assets and liabilities on the balance sheet, with equity considered as a liability).
To be clear the full workflow would be:
Sales Invoice for membership fees:
DR Accounts receivable (Customer-member)
CR Membership fees Receipt of funds from members for membership fees:
DR Cash/Bank
CR Accounts receivable (Customer-member) Allocation of 5% of membership fees at end of period (Journal):
DR Retained earnings
CR Disaster relief reserve Decision to fund member(s) as a result of a disaster (after decision by the committee of management) Purchase Invoice:
DR Disaster relief expense (P&L)
CR Accounts payable (Creditor - member) Payment to Creditor-member:
DR Accounts payable (Creditor-member)
CR Cash/Bank Reduce Disaster relief reserve by the amount of relief given (Journal)
DR Disaster relief reserve
CR Retained earnings.
Fair enough. What ever reflects the underlying ownership and income / expense reporting.
The technique I listed above is useful for cases such as a self managed super fund when funds are entered or with drawn by a superfund member. No changes occur the superfunds retained earnings but the super funds income / expense, the members capital account and in some cases income tax provisioning are effected.
It is possible the changes Lubos is proposing for project tracking may simplify this process.