Amortizing Expenses
| HelpRegister |
Amortizing Expenses Aaron wrote.....
My club has expenses for our post office box which are
paid twice a year. We also have interest income from our money market account.
It seems that our membership is being hit unfairly during these times when we
look at the member tax allocation report. For example a new member joins the
club just after we pay for the expense and basically gets a free ride on that
expense (but claims ownership of the interest income) for the next 5 months. Is
there any way to amortize the expense over the six month period? Or do we just
let them ride for the five months and not worry about it?
I would probably recommend the latter. More than likely the bill
is probably small, so rather than doing some creative
accounting I would just let the new member ride for the
remainder of the 6 months.
Having said that, there is a way that you could amortize the expense over 6
months using the bivio software. Here's how.... Divide
the amount of the post office box expense by 6 (the number of months it needs to
be amortized over). Then, when the bill is paid, simply enter a cash
transfer from the cash account used to pay the bill to the Suspense
Account. Then enter an expense equal to 1/6th of the post office box
bill each month. When you enter these expense transactions into bivio
be sure to use the Suspense Account as the source of the funds to pay the
expense rather than the account that the bill was actually paid for.
At the end of the 6 months the balance in the Suspense Account, assuming no
other transactions, will be zero and the account actually used
to pay the expense will reconcile throughout the period.
A word of caution, however. If you decide to get this creative
be sure that any amounts entered in this manner are fully amortized by the end
of the year. Otherwise, you run the risk of getting involved with
accrual based accounting to the extent that you are reporting expenses for tax
purposes in a year other than the year that they were actually incurred and
paid. Not a good idea for clubs operating under the cash accounting
method.
One last point. Now that bivio offers a club the capability to
create additional cash accounts, if you really wanted to get fancy, you could
create a new cash account called "Post Office Box Advanced Payments" and use
it as described above but instead of the Suspense Account.
Thanks for the great question and thanks for using bivio!
|
|
||||||