Accounting, Payroll & Pension Issues/Bookkeeping record of investments
I am church treasurer and we are switching to a double-entry bookkeeping system. We have endowed funds on deposit with our denomination and these are of course recorded on our balance sheet. Every quarter, the denomination reinvests our dividends and issues a report on the value of our endowment. How should these be handled on our books?
It seems to post the change in value of the endowment, the income account "capital appreciation" has to be credited. But this means that capital appreciation (unrealized capital gains) will show up on our income statement alongside contributions. That doesn't seem right.
First, I have no experience with non-profit accounting.
Regarding changes in market value, normally under typical business accounting, changes in market value do not show up on the financial statements. Thus there would be no unrealized capital gains (or losses) account.
Capital gains or losses should be recognized when the investments are disposed of.
As far as dividends reinvested, that should be recorded. Credit a dividend income account and increase the cost based value of the investment account.