Could you please elaborate on the benefits of class tracking?

I understand the desire to keep track of funds, but am not sure of the benefits of using class tracking to do it. What do you think of setting up separate sub-accounts under the checking to allocate exactly which portion of cash is attributable to general operations, building fund (for example), etc? Then when the balance sheet is generated the amount in each fund is clearly stated. What do you see as the drawbacks to this method vs class tracking?

Comments for Could you please elaborate on the benefits of class tracking?

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Oct 04, 2013
class tracking
by: Sandi

We use sub bank accounts to track items such as the Education Fund and Kitchen Fund, which have a set amount allotted and are used as needed. They are set up and designated funds are transferred to them as council decides (normally at the beginning of the year), they are more work for the bookkeeper (ensuring the checks are taken out of the sub account not the general) so not to many of them are created. Class is still used on these. These are easier for the council to track funds.
The other fund accounts are in the General account and are easier for bookkeeping to enter and track via the classes: utility bills, reimbursements for minor church supplies, Sunday school material etc.
Hope this helps
Prayers

Oct 04, 2013
Class tracking is not the optimal solution
by: Bill OConnell

The optimal solution does not use classes at all.

Your instinct is correct that sub-accounts are a tool to produce the desired result - but the sub-accounts should not be done inside cash. Rather, ccapture the activity within sub-accounts but them give them Fund treatment on the Balance Sheet.

See my piece in this site about just this topic at

http://www.freechurchaccounting.com/fund-accounting-in-QuickBooks.html

Also more on this at www.wisdomoverwealth.com.


Aug 09, 2014
Bill, can you clarify?
by: Phil

Bill, you mention that we should create sub-sections within our chart of accounts for each "fund" and then close them out into equity accounts each accounting period. For monthly reports to be accurate, we'd have to do this every month, correct? If we do that, however, wouldn't that skew the Budget to Actual reports when we are budgeting yearly for individual expense accounts?

Please clarify, thanks!
Phil

Aug 10, 2014
Budget to Actual when zeroing subaccounts for fund accounting
by: Bill OConnell

Phil

Great question.

Remember the context in which this question arises. When not using classes, QuickBooks is general purpose software which is keeping track of one "operating" entity. And in this case the other funds are second and third, etc, sets of operations.

Thus you will NOT want to leave the fund budgets inside your operating budget.

Keep in mind that most funds in most churches are pretty specific. A Building Fund, for example, simply collects designated funds, and spends those funds on capital construction, and can be captured fully with two sub-accounts. If the fund has a budget at all, it can be compared to actual quite easily with a supplementary report.

I prefer this style because it focuses everyone on the fund balance, which in my experience is where the focus needs to be. One can argue the class approach is easier, but then the fund balance is only reported in supplemental reports, and leadership can easily lose sight of where the fund stands each month.

Mar 13, 2015
Classes allow you to include staff pay
by: Anonymous

Several years ago we hired someone to work part time on a special program (tutoring & enrichment for kids being home-schooled). Income & expenses of this program came from a restricted fund. We did, in fact, establish specific income & expense accounts for the tutoring program; however, the staff person's salary could not be paid through these accounts, since we needed (of course) to use the Pay Employees sub-program in order to prepare her paychecks, record her income tax withholding, Social Security, etc. etc. We did, however, have an established system of assigning classes to our restricted funds. We assigned the appropriate class to the staff member's paycheck, and were thus able to include that expense in our reports on the program.

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