AboutCarlton Johnson, LPA, MFP, ABA Expertise Accounting for Small and Mid-sized Businesses
Bookkeeping - Setup and Maintenance
General Business Taxation
General Risk Management
Financial and Business Line Modeling
General Payroll
Employee vs. Independent Contractor Questions
Experience Concurrent Experience Includes:
9 Years in General Accounting
7 Years in Business Planning and Setup
6 Years in Financial Analysis and Modeling
Organizations Fellow of the Financial Academy of Financial Management
Education/Credentials Bachelor of Arts, Accounting, Morehouse College.
Licensed Public Accountant (PA), State of Delaware.
Master Financial Professional (MFP), American Academy of Financial Management
Accredited Business Accountant (ABA), Accreditation Council for Accountancy and Taxation
Question I'm trying to figure out how to show the transfer of funds in my receipts and disbursement reports. Do I list the transfer as a receipt for the account that the transfer is made to. If so does this not make it look like its new money when in fact its already been accounted for when it was initially received. However, if I don't list it as being transferred, I don't show the movement of the money. This then makes my disbursements inaccurate. Any suggestions would be appreciated.
Answer Hi Dee,
This issue sounds similar to what is found in inter-company accounting or transfers in fund accounting. Let's look at an example:
If account 'A' receives funding of $100 (assuming an asset account, therefore a debit balance) the recording would require a debit to account 'A' with a credit to a revenue account or capital account (if a capital contribution).
Debit Account 'A' $100
Credit Revenue or Capital $100
Now that Account 'A' is funded and you would wish to transfer $50 to Account 'B' (assuming again account 'B' is an asset account) a debit would be recorded to Account 'B' with a credit to Account 'A'.
Debit Account 'B' $50
Credit Account 'A' $50
In this case, funding has been transferred from Account 'A' to Account 'B'. This would be considered a reclassification or permanent transfer because 'B' may have a specific purpose differing from 'A'.
In the instance of an inter-company or inter-fund transfer:
Debit Account 'B' - Due To A $50
Credit Account 'A' - Due From B $50
In this case, funding has been transferred from Account 'A' to Account 'B'. This would be considered a temporary because 'B' is essentially "borrowing" from 'A' only to have 'A' replenished at some point in the future.
Fund accounting is similar in this setup. So in general, if is it a re-class or permanent transfer, there would be no "due to"/"due from". If it is a temporary transfer there would be a "due to"/"due from" (and seen in any detailed analysis or schedule). Nonetheless in the preparation of financial statements the "due to"/"due from" would be eliminated and thus showing the net balances in the respective accounts.
