I run a club which I use Manager to report its accounts.
The club collects and donates money to charity, some of which come directly into our bank from members collections and some are paid by members into another bank held on our behalf.
I do not want these collections to be seen as part of our P&L but do want to see them reported in our accounts asset/liabilities accounts.
For money paid into our bank we issue cheques to make payments into the charity bank account.
What is the correct accounting procedure for handling this sort of requirement. I can easily create another bank account but not sure how to correctly post the transactions to meet what I would like to achieve in Manager.
I currently report this as a note on our accounts but hope manager has a better way of doing this.
I want our P&L to report operating income and expenses and not charity collections which somewhat cloud the issue.
Charitable receipts and payments directly to/from a bank account owned by the club are entered exactly like any other transaction. From an accounting (and tax) perspective, it doesn’t matter why you receive the money; it is income. So post the receipts to an income account like Charitable contributions received. If donations are considered legitimate business expenses in your jurisdiction, just enter payments and post to an expense account like Donations. The two will offset and you will not be paying any income tax on the contributions received. Also remember that financial accounting and tax accounting sometimes differ, so you may have to make adjustments on one side of the ledger or the other when filing taxes.
You have little choice about this. Financial activity in your bank account must match activity recorded in Manager. There may be no net effect if all contributions go out as donations, but they still need to be recorded.
How to handle these contributions depends on ownership of the other bank account. If it is maintained by someone else only for you, treat it like another bank account of your organization and see comments above. If members simply make contributions to a charity’s bank account, this has no formal connection to your club. Leave such contributions out of your records.
Structure your chart of accounts to include operating income and expenses and non-operating income and expenses through use of groups. This is very common. See the example in this Guide: https://www.manager.io/guides/9181.
If the club is receiving donations on behalf of a specific charity (as agent), then those funds are being held in trust on behalf of that charity until they are paid. Therefore the receipts would be posted to a BS Liabilities trust account in the name of the charity.
However, if the donations are of a general nature and the charities to benefit are ad hoc selected, then the receipts and payments would be posted via the P&L.
I am still not sure where to represent the charity collections/payments.
We are a Masonic Lodge and the cash payments are processed through our bank account and cheques made out to our Grand Lodge registered Charity.
We pass the charity donations to them with details of who made the donation and they record them in our ‘account’ they also claim tax gift aid rebates on behalf of donors and add these to our ‘account’
They keep records of our donations so that they can make charitable gifts at our request.
We get annual statements from them and I would like Manager to report the aggregate totals of money they receive directly from us and indirectly from members.
I do not intend to replicate every donation or tax refund transaction. I just want them recorded as the charitable assets available for us to donate to charities. Preferably keeping it separate from our P&L operating activities.
So from what you say the cash donations passing through our bank account should be seen in our P&L and cheques as an expense donation.
Could we record these cheque payments record in a Manager ‘charity’ bank account. I would record the cheques ias a transfer and not a ‘purchase’ order as I would do for a normal cheque.
I could just as easily add a note of this to the annual accounts and not record the external account in Manager so it’s a case of what makes sense and what is best.
Thanks for all your advice I am sure once sorted it will help many other Lodges who all have similar problems to solve.
Cheques made out to the Grand Lodge charity fall into the category I described where there is no formal connection to your lodge. The Grand Lodge may keep track of your members’ contributions, but the money is never really yours. You just have the power to direct how it is used by the Grand Lodge. So leave those out of your records entirely. (You can keep a separate spreadsheet if the Grand Lodge doesn’t provide status information.)
When a cash contribution goes into your bank account, handle it as I said earlier, recording the income in Charitable contributions received and the onward donation in Donations. Or you could actually receive and spend from the same account, with the onward donations going as contra entries that tend to zero out the amount received, thus eliminating the income.
With all that said, don’t ignore the potential charitable deductions members may want (if allowed in your jurisdiction). If they contribute directly to you, they will get a charitable contribution deduction only if your organization qualifies as a charity. If only the Grand Lodge charity qualifies as a charitable organization, your lodge will get the deduction, not the individual members. That could be a powerful reason for members to write cheques directly to the Grand Lodge charity instead of giving cash to your lodge.
Regardless of how you decide to track things, remember that your ability to collect and direct contributions to/from the Grand Lodge does not necessarily make such activity part of your lodge’s business activity. There may be good reasons to avoid doing anything that makes it appear that such contributions and donations are business transactions of your lodge. Local accounting/legal advice may be needed on this question. But how to handle any approach is Manager is straightforward.