USA Contra accounts

[Laleda62]

I work for a non-profit and the board has asked if instead of listing expenses separately for certain accounts to put them as contra revenue accounts. For example, for events instead of having expenses separate it would be "less cost". I've only seen this done with merchandise sales so I was wondering if it made sense when selling other things like event tickets, meals, etc Thank you in advance.

 

[BIG E]

Why don't you ask the non-profit's accountants how they'd prefer the general ledger accounts be set up?

 

[Laleda62]

I am the accountant and the cpa I work with does whatever the board says, so I was just trying to get am outside opinion. Thanks.

 

[BIG E]

I have done some non-profit organization work in the past.
What I normally did was to keep the revenue from what I call "Special Events" separate from the various expenses from the Special Events.
I wouldn't net them out in the general ledger.
When preparing any financial statements I would agree with you that revenue should be shown less the costs related to the event, so it eventually shows up net.
You would need to show it that way on the 990 Form (whichever version is used). The fact that there's no inventory involved is irrelevant.

 

[DrStrangeLove]

I work for a non-profit and the board has asked if instead of listing expenses separately for certain accounts to put them as contra revenue accounts. For example, for events instead of having expenses separate it would be "less cost". I've only seen this done with merchandise sales so I was wondering if it made sense when selling other things like event tickets, meals, etc Thank you in advance.

That would seem to mischaracterize expenses. What advantage would it provide other than to make it seem like the non-profit was bringing in less revenue than it actually was? I don't see any advantage to the non-profit other than possibly helping it evade UBIT.

Plus, the expenses aren't really "contra" revenue the same way an account like sales discounts or sales returns is contra revenue (a reduction in the resources sales brought in, not a consumption of resources used to bringing revenue in).

Are you really sure this is a good idea?