Welcome to Lesson 7.4! In FastFund Raising, handling advanced workflows often means ensuring that your fundraising data translates perfectly into your accounting general ledger. One of the most important periodic tasks to maintain accurate financial statements is Reclassifying Transactions, specifically concerning non-cash, In-Kind donations.
In this lesson, we will explore the accounting mechanics behind In-Kind gifts, why they must be reclassified, and how to execute this process efficiently.
When you record an In-Kind donation and your system is integrated with FastFund Accounting, the system automatically handles the initial journal entry for you.
The posting of an In-Kind donation automatically debits a temporary current asset account known as the In-Kind Contributions Transfer account. Simultaneously, the credit is posted to the revenue account that is actively linked to the specific Gift designation selected during the transaction entry.
While the initial entry properly records the revenue, leaving the balance sitting in the transfer asset account is incomplete. To comply with accounting standards, you must match your In-Kind revenue with your In-Kind expenses.
The amount posted to the In-Kind Transfer account should be reclassified as either an In-Kind Goods Expense account or an In-Kind Services Expense account. In certain instances, if the donation is a capital asset (such as a donated car), the value must instead be transferred to a Fixed Asset account.
This reclassification requires manual intervention from your fiscal team. On a monthly basis, an account analysis should be performed on the activity posted to the In-Kind Contributions Transfer Account.
If there is a balance in the account at month-end, a journal entry must be posted to reclassify the contributions. The journal entry will credit the In-Kind Transfer account (reducing its balance to zero) and debit the appropriate In-Kind Expense or Fixed Asset account.
Because this reclassification is a routine monthly task, FastFund provides a tool to streamline the data entry. Araize highly recommends marking this specific journal entry as a recurring entry. By setting the entry as recurring, it will be saved in your system and available to easily re-post in subsequent months, saving you from having to rebuild the account distribution lines from scratch every time.