USA Relationship of Bank Accounts to General Ledger

[Nicholas Fernandez]

Hi all,

I am working with a non-profit that has multiple bank accounts and multiple funds in their general ledger (chart of accounts).

I am trying to confirm that what I lay out below is correct. Thank you for your help.

1. You can have multiple bank accounts for the same currency type that all balance to a single general ledger.
2. You should only have one general ledger for the organization.
3. Non-profit organizations can have multiple funds in their general ledger.
4. General ledger funds do not have any direct relationship to bank accounts.
5. The setup of bank accounts, GL accounts, and GL funds should be determined by the organization to make reporting and balancing easy to track.
6. Bank reconciliation is the act of balancing all of your bank accounts to the general ledger.
7. Accounting software allows for the setups I have described.

Thank you for your help. I am new to this and trying to understand.

Best,
Nick

 

[eHollycpa]

1. You are correct there should be a single control account in the GL for cash with each of the individual checking accounts being sub-accounts of the cash control account.
2. I would recommend that your organization only maintain on GL control account for cash.
3. Not for Profit organizations typically maintain separate funds to account for the different program funds they are responsible. But remember there can only be a single general fund. Multiple general funds are not allowed.
4. I don't understand the question. Are you confusing program fund balance amounts with cash account balances in the general ledger (GL)? In order to reconcile cash on a regular basis GL cash accounts should exist that represent the amount of cash held by the organization in the bank. Program fund balances should represent the amount of funds (revenues: cash plus accrual based receipts) available to be spent on a particular program.
5. General ledger accounts must be established to properly present assets, liabilities, total equity (fund balance), revenues, and expenses.
6. You are correct.
7. Correct. All accounting software allows for the creation of a full chart of account, representing all account types. See my reply in item 5.

 

[Nicholas Fernandez]

Thank you!

For #4, I meant that you could have multiple program funds with only one bank account or the opposite without any problems, but that some setups will be better than others.