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Victoria_M
February 16, 2023
Question

Non-Profit Opening Balance Equity Account

  • February 16, 2023
  • 2 replies
  • 0 views

My client (non-profit) is switching to QBO. When entering opening balance, they've created two Equity accounts, one for restricted funds and one for unrestricted funds, and recorded a JE for open balances against these two accounts. Is this a proper way to do this? The original Opening Balance Equity account has not been used.

Thank you!

2 replies

Rustler
Rustler
February 16, 2023

Not in my opinion. Equity the amount of value the business owes the owners, total assets less total liabilities. It is not a fund.

A fund is a bank account, or at least an asset account.  In fund accounting there is an operational checking account that all transactions are made from.  If you are spending fund monies, then first you move that total from the fund account to the operating account, then it is spent.

 

OBE is an account intuit created cause they did not know how to allocate equity to multiple owners, or did not care to do it. So when tell QB that account has a balance, that balance goes to OBE. After all opening balances are entered, OBE should be moved to owner equity with a journal entry. Assuming OBE is positive on the balance sheet, debit OBE and credit owner equity

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Victoria_MAuthor
February 17, 2023

I am still confused. So I enter opening accounts balances against OBE account, and then allocate it between restricted/unrestricted equity accounts?

Rainflurry
Rainflurry
February 18, 2023

@Victoria_M 

 

Yes, post the opening balances to OBE and then allocate the balance between restricted and unrestricted funds.  To do that, debit OBE and credit restricted/unrestricted funds.

Rainflurry
Rainflurry
February 16, 2023

@Victoria_M 

 

Yes, that is fine as long as the unrestricted funds have previously been reported as income.  Restricted funds are generally recorded as equity (Net assets, actually) for a non-profit (NP) since they are not income until all of the conditions placed on that contribution are removed, at which point, it is recorded as income.  There is no owner's equity in a NP since there are no owners.  

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Victoria_MAuthor
February 17, 2023

So in general, aside from this specific client, which account shall I use to record beginning balances to for a non-profit?

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