Help - nonprofits, fixed assets and equity


P

Paul Danaher

I just created a dummy nonprofit and plugged in some numbers. I'm puzzled at
seeing the fixed assets - in this case, computers and a bit of inventory
(T-shirts and stuff) - appear both under "Assets" and under "Equity", but
I'm having trouble getting my head around the definition of "equity" in
nonprofits anyway.
Any help would be greatly appreciated.
 
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A

Allan Martin

Paul Danaher said:
I just created a dummy nonprofit and plugged in some numbers. I'm puzzled
at seeing the fixed assets - in this case, computers and a bit of inventory
(T-shirts and stuff) - appear both under "Assets" and under "Equity", but
I'm having trouble getting my head around the definition of "equity" in
nonprofits anyway.
You have to get your head around how Quickbooks handles opening balances. It
does not matter if the entity is for profit or non-profit, the other side of
the entry always goes to equity. Naturally after all is set up the user can
make a journal entry if needed and clear up the equity account.
 
P

Paul Danaher

Allan said:
You have to get your head around how Quickbooks handles opening
balances. It does not matter if the entity is for profit or
non-profit, the other side of the entry always goes to equity.
Naturally after all is set up the user can make a journal entry if
needed and clear up the equity account.
Oh, so that's the issue. Does this reflect QB definition of "equity" as "net
worth", which strikes me as idiosyncratic? And if I pull out "fixed assets"
(aka "Opening Balance Equity") from the "Equity" figure, what happens (or
has to be made happen) to get the balance sheet to balance again? (I've got
enough of a headache from FASB 117's use of "net assets".)
 
A

Allan Martin

Paul Danaher said:
Oh, so that's the issue. Does this reflect QB definition of "equity" as
"net worth", which strikes me as idiosyncratic?
Its not really a definition, its more of an convention in QB. If you are
setting up a new account, lets say fixed assets and decide to enter the
opening balance for this account, then the program needs to enter a credit
of equal value somewhere. By convention the other side of the entry is to
"opening Balance Equity". Quickbooks while it goes out of its way to hide
the fact from the end user is a double entry accounting system. For every
debit there must be and equal credit.



And if I pull out "fixed assets"
 
P

Paul Danaher

Allan said:
Its not really a definition, its more of an convention in QB. If you
are setting up a new account, lets say fixed assets and decide to
enter the opening balance for this account, then the program needs
to enter a credit of equal value somewhere. By convention the other
side of the entry is to "opening Balance Equity". Quickbooks while
it goes out of its way to hide the fact from the end user is a double
entry accounting system. For every debit there must be and equal
credit.
Okay, I think I'm there - the crucial point is the "opening balance". The
"fixed assets" (noncurrent assets) are being treated as capital brought in
in kind at the start of the past financial year (what I didn't realise was
that there are no "fixed assets" shown in earlier years).
 
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P

Paul Danaher

Allan Martin wrote:
....
Its not really a definition, its more of an convention in QB. If you
are setting up a new account, lets say fixed assets and decide to
enter the opening balance for this account, then the program needs
to enter a credit of equal value somewhere. By convention the other
side of the entry is to "opening Balance Equity". Quickbooks while
it goes out of its way to hide the fact from the end user is a double
entry accounting system. For every debit there must be and equal
credit.
Okay, the remaining problem is that the computers were purchased in a prior
period, so they're being improperly treated as a donation in the balance
sheet period. This is something that does need sorting out, presumably
through adjustment to the previous two years' financials.
 
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