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Archdiocese of Denver Office of Parish Finance Parish Accounting Guide Capital Entity Procedures The Capital Entity allows the parish to account for Capital Project fundraising monies including unrestricted, designated and temporarily restricted funds as well as to account for real property purchase or construction costs. This entity allows the parish to track capital funds separately from operating activity. Unrestricted funds are funds from various sources that can be used in any manner by the parish in accordance with its tax exempt purpose. Designated funds are unrestricted funds that the Pastor has agreed to set aside for a specific purpose, for example a capital building project. Designated funds can be re-purposed with the Pastor’s approval. Temporarily restricted funds are donated funds that have been restricted as to purpose or time by the donor. In accepting donor restricted funds, the parish promises to comply with the donor’s intent. Any other use requires specific permission from the donor. The Capital Entity is the only entity with capital and construction expense accounts (6000 series). These accounts allow the parish to budget for and monitor large capital expenditures. Please refer to the Parish Accounting Guide “Capitalization Procedures in ConnectNow” for information on how to record the purchase of capital assets not associated with a large capital project. The Capital entity also allows Designated and Temporarily Restricted funds to be “released” to the General entity once the designated or restricted purpose is met, i.e., the funds are expended for the capital project. This will occur when the project is complete, usually at the time the Certificate of Occupancy (CO) is issued. Activate Capital Project Entity accounts– In Accounts, select Chart of Accounts (Add Sub-Account) and search on the capital entity you wish to set up. This entity is available as a General, Cemetery or QuasiParish related All accounts that are available in this entity will be listed. Activate those that you will need from the following (account numbers shown below are for the general capital entity as an example): 1003.00CAP-1042.00CAP Current Capital Unrestricted or Designated Cash/Checking/Savings/ Investment Account - if the funds are maintained in a separate (capital purpose) bank or investment account 1067.00CAP-1072.00CAP Current Capital Restricted Savings or Investments 1200.00CAP Due To/From Other Entities – IMPORTANT NOTE: Go to Set Up/Due To/From Accounts and assign this account to the Capital entity. 1218.00CAP Pledges Receivable 1250.00CAP-1262.00CAP Long Term Capital Unrestricted or Designated Savings or Investment accounts 1282.00CAP-1292.00CAP Long Term Capital Restricted Savings or Investment accounts 1350.00CAP-1351.00CAP Construction in Progress to hold construction costs incurred in one fiscal year when the project will not be completed until the following fiscal year. 2031.00CAP Accounts Payable - if the funds are maintained in a separate capital bank account (mark the accounts payable box). June 6, 2014 Capital Entity Procedures Page 1 of 4 Archdiocese of Denver Office of Parish Finance Parish Accounting Guide Capital Entity Procedures 2903.00CAP GEN Capital Project Net Assets 3600.00CAPCAP-3629.00CAPCAP Unrestricted/Designated Capital Income accounts 3600.00CAPCAP-3639.00CAPCAP Restricted Capital Income accounts 3640.00CAPCAP-3672.00CAPCAP (Contra Income) Transfer from Capital to release any remaining capital funds to the General entity once construction is complete and the asset is capitalized on the Statement of Financial Position. 4080.00CAPCAP-4552.00CAPCAP Salary and Benefit Expense, if personnel costs are directly attributable or allocable to the Capital project. These accounts are intended for personnel costs that are not capitalized into the total capital asset. 6020.00CAPCAP-6075.00CAPCAP Operating Expenses, if operating costs are directly attributable or allocable to the Capital project. These accounts are intended for operating costs that are not capitalized into the total capital asset. 6101.00CAPCAP-6181.00CAPCAP Capital costs that will be capitalized on the Statement of Financial Position once the construction project is complete. 6200.00CAPCAP-6207.00CAPCAP Construction costs that will be capitalized on the Statement of Financial Position once the construction project is complete. 3017.00GENCHU Transfer from Capital Campaign is used in association with the 3640.00CAPCAP account to transfer any remaining capital funds to the General entity once the capital project is complete. Also available in other General entity departments. 5099.00GENCHU Transfer Unrestricted to Capital Fund is used in association with the 3629.00CAPCAP account [Internal Capital Transfer from Unrestricted Cash] to transfer unrestricted or designated funds from the General entity to the Capital entity to reflect those funds as intended for capital project purposes. Capital Entity Cash Flow – The Capital entity is intended to show the receipt of capital funds from various sources (including internal entity transfers) and the disbursement of those funds for capital or construction costs. Therefore Capital entity designated and/or temporarily restricted funds will be treated differently than those of the Designated and Temporarily Restricted entities. The Capital entity funds will not be released to the General entity during the construction phase, and then only if there are funds remaining in the Capital entity when the project is complete (as previously noted, when a CO is issued). As always, it is presumed that construction costs are expended from donor restricted funds before expending unrestricted/designated funds so that any remaining funds will less likely be restricted funds. If the Pastor wishes to designate these remaining funds for future repairs and maintenance of the asset, the remaining funds should be transferred from the Capital entity to the Designated entity. If the remaining funds are not specifically designated, they should be transferred from the Capital entity to the General entity. It will be rare to leave the remaining funds in the Capital entity once the project is complete, unless the parish is planning a phased capital project and future construction will be scheduled. June 6, 2014 Capital Entity Procedures Page 2 of 4 Archdiocese of Denver Office of Parish Finance Parish Accounting Guide Capital Entity Procedures Capital Entity Pledges Receivable –Under the modified accrual basis of accounting the parish will now be required to record pledges receivable for a capital project. However, only record a receivable if a donorsigned pledge card has been received indicating a promise to make one or more payments to donate for the capital project in the future. Capital Funds Held in the General Entity – If capital funds are not separately held in a capital cash, savings or investment account, the Due To/From feature of the ConnectNow accounting system will automatically record inter-entity receivable/payable entries when funds cross entity borders, i.e., funds held in the General (GEN) entity bank accounts are deposited to or expended from Capital (CAP) entity income or expense accounts. The Capital entity Due To/From account balance should represent the amount of funds held in other entities’ cash accounts and should show a positive, or receivable, balance. Capital Funds Held in the Capital Entity – Capital activity will only be recorded in Capital entity asset, liability, income and expense accounts. No Due To/From activity will occur when the transactions do not cross entity borders. Capital Transaction Examples - The following examples reflect how to record Capital entity transactions when cash is held in the Capital entity bank account(s). 1. The parish receives pledge cards totaling $500,000. Deposits Debit 1218.00CAP Credit 3630.00CAPCAP Pledges Receivable CAP Restricted Gifts $500,000 $500,000 2. The parish receives pledge payments in the amount of $20,000. Deposits Debit 1067.00CAP Credit 1218.00CAP Restricted Savings Pledges Receivable $20,000 $20,000 3. The parish receives an unrestricted donation of $10,000 and the Pastor puts to toward the capital project. Deposits Debit 1003.00CAP Credit 3600.00CAPCAP Cash Checking Account Gifts and Bequests $10,000 $10,000 4. The parish holds a fundraising event to benefit the capital project. The event grosses $12,000, offsetting costs are $7,000, netting $5,000 Deposit and Check Debit Credit Debit Credit June 6, 2014 1003.00CAP 3610.00CAPCAP 3613.00CAPCAP 1003.00CAP Cash Checking Account Fundraising Income Fundraising Cost Cash Checking Account Capital Entity Procedures $12,000 $12,000 $7,000 $7,000 Page 3 of 4 Archdiocese of Denver Office of Parish Finance Parish Accounting Guide Capital Entity Procedures 5. The Pastor designates $30,000 of parish unrestricted [General] savings for the capital project. Deposit and Withdrawal Debit Credit Debit Credit 1003.00CAP 3629.00CAPCAP 5099.00GENCHU 1015.00GEN Cash Checking Account CAP Internal Transfer from Unrestricted Cash Transfer Unrestricted to Capital Fund Savings $30,000 $30,000 $30,000 $30,000 6. The parish pays $500 for printing and copying for capital project fundraising brochures. Check Debit 6028.00CAPCAP Credit 1003.00CAP Printing Copying Cash Checking Account $500 $500 7. The parish purchases furnishings in the amount of $15,000 for the capital project. Check Debit 6160.00CAPCAP Credit 1003.00CAP Furnishings & Fixtures Cash Checking Account $15,000 $15,000 8. The parish processes the first construction draw from the capital savings account. Check Debit 6200.00CAPCAP Credit 1014.00CAP Construction Contractor Revolving Fund Savings $15,000 $15,000 9. The fiscal year end arrives and the capital project is not yet complete. The parish has expended $400,000 in capital costs (do not include capital operating costs like printing/copying). The parish capitalizes the construction costs in Construction in Progress. Journal Debit 1350.00CAP Credit 6200.00CAPCAP Construction in Progress Construction Contractor $400,000 $400,000 10. The parish completes the construction project. The total cost is $1,000,000. Journal Debit 1370.00GEN Credit 1350.00CAP Credit 6200.00CAPCAP Building Construction in Progress Construction Contractor $1,000,000 $400,000 $600,000 11. $25,000 remains in the capital entity when the capital project is complete. The Pastor does not designate these funds and they are returned to the General entity. Deposit and Withdrawal Debit Credit Debit Credit June 6, 2014 1015.00GEN 3017.00GENCHU 3641.00CAPCAP 1003.00CAP Savings Transfer from Capital Campaign Transfer Capital to Church Cash Checking Account Capital Entity Procedures $25,000 $25,000 $25,000 $25,000 Page 4 of 4