On 12/5/2021 7:19 AM, Michael Hendry wrote:
On 5 Dec 2021, at 11:39, Dr. David Kirkby <drkir...@kirkbymicrowave.co.uk>
wrote:
If a company can potentially pay out X pounds, but has not paid out any at
all, where would that be entered in GnuCash? I assume its a liability, but
should it be entered into liabilities, or perhaps retained earnings?
I’m not an accountant.
I keep the books for a couple of charities, one of which receives donations
which the donor has ear-marked for a particular purpose which might not come up
in the same financial year.
I thought it would be a good idea to record this as a liability, which would
survive the year-end and remind the trustees that there was a sum which could
only be spent for that purpose, but I was hauled up by the accountant who
examines our records for the charities register, and had to abandon that method.
You should probably get professional advice…
Regards,
Michael
Michael, you are describing something else, the "restricted funds" of a
non-profit. And the what you describe is indeed one of the approved ways
of dealing with that, especially when there are not separate bank
accounts for the restricted funds. Always treated as a liability if
legally restricted funds, usually treated as a liability if "hard"
restricted << would need to ask the donor before using for something
else >>, and sometimes even when a "soft" restriction << the donor
specifies something like "I'd like this to be used for X but if you
really have to can use for something else" >>
I think what we were actually being asked about was a "contingent
liability" << say the matter was under adjudication and no way of
knowing what the ruling will turn out to be be >>
CONSULT YOUR ACCOUNTANT ON THIS. My guess is that it will call not only
for particular treatment but an annotation on the Balance Sheet
explaining the special situation.
Michael D Novack
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