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Old 05-24-2016, 03:16 PM
Djeub Djeub is offline
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Accounting for cash back for returned items

I recently had to return an item purchased for our 501(c)(3). I received cash back and then used it to purchase the correct item. How do I account for the cash received back and then used to pay for a purchase? How would I account for cash received back for a return and then deposited in the bank? Any help would be greatly appreciated.
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Old 05-24-2016, 03:44 PM
Lorin Browning Lorin Browning is offline
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How to reverse the purchase depends upon how you recorded it:

For example, if you wrote a check (with a credit to checking account) and expensed the item (as debit to an appropriate expense account), the adjusting entry would be a general journal entry which has a debit to the checking account and a credit to the expense account. That nullifies the original entry.

Treat the new purchase as you would any other purchase.

If your original purchase was handled in another way, give us the details and someone will show you how to adjust that procedure.
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Old 05-25-2016, 06:46 AM
Djeub Djeub is offline
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Accounting for cash back for returned items

Thank you so much for replying. The original purchase was for $115.00. I entered the purchase through "write checks". One item had to be returned, and I was given back $2.94 in return. I was purchasing additional items at the time, so I used the $2.94 and our debit card to pay for the purchase. This happened again last week, but the returned cash back was just deposited in the bank. These purchases were assigned to donors. I need to make sure their donation gets credited for the returned amounts as well. Your help will be so greatly needed. Thanks.
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Old 05-25-2016, 08:22 PM
Lorin Browning Lorin Browning is offline
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If you wrote using the Write Checks function, then your original entry was a debit entry of $115.00 to some expense or purchase account and a credit to your checking account for $115.00.

When you returned the item, you could enter $2.94 as a credit to whatever expense or purchase account you used when writing the check. To keep the books in balance, the $2.94 has to be entered as a debit to some account. But what account?

But first a digression:

You say ďThese purchases were assigned to donorsĒ. How is that possible? By the time the donorís donation was deposited, it was no longer differentiable from other donations. It is only in the advertising world that one has orange money. If you are trying to tie each purchase with an individual donation, you are severely complicating things. Donít even try. In other words, the donation doesnít get credited for the returned amount. The donation is still on the books.

Now back to what account?: Let me suggest that an appropriate account would be some Accounts Receivable account, even if you have to make up a new account. It could be something as simple as a debit entry to the Credit With Vendor account. Letís suppose that is account #123. (If you are not using account numbers, again you are making your procedures more difficult.)

Letís account for the new purchase: Letís suppose the total of the new purchase was $200. The entry would be a credit amount of $197.06 to the debit card account, a credit amount of $2.94 to account #123, and one or more debit entries totaling $200.00 to the appropriate expense or purchase account.

Related comments: If what you are doing is trying to account for donor donations with restrictions imposed, there is an easier to way to do that than by using something similar to what used to be called Fund Accounting.

Indeed if your organization needs to have audited financials for some reason, statements based on fund accounting rather than FASB Statement 117 just will not receive a ďpassingĒ grade for the audit unless the organization pays someone an excessive amount for updating the financials to GAAP compliant financials. But this is probably an entirely different topic than what you are asking about.
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  #5  
Old 05-26-2016, 07:11 AM
Djeub Djeub is offline
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Accounting for cash back for returned items

Lorin, thank you for your patience. We are a small non-profit with a volunteer treasurer with little accounting experience. Quickbooks keeps us straight. We use Jobs for donations (all unrestricted) that we are required to provide a detail of expenditures to. It's just an easy way to keep track of purchases and run reports. Our accounting, thanks to Quickbooks, is very simple - donations received and deposited and purchases made by debit card. I can enter the purchase, I just don't know the Quickbooks entry for the cash back. Should it be a journal entry or a separate entry somewhere else? It would be so helpful if you could take me step-by-step. 1) Enter purchase in Write Checks for amount actually charged to the debit or for the full amount of the purchase? 2) How to show cash back from the return? 3) How to show the split payment by debit and cash? Any help in the data entry steps would be so greatly appreciated.
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Old 05-29-2016, 07:08 PM
Lorin Browning Lorin Browning is offline
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Letís break this down into a series of steps and make sure that we are in agreement on each step.

Step 1: How do you record a donation?

Hereís how I would do it (if there was no pledge or invoice involved):

First, you have to associate a JOB with a CUSTOMER.

Letís assume that the CUSTOMER is John Jones and that the JOB connected with that Customer is 1. Thus in your drop-down customer list you would find you would find the two lines:
  • John Jones
  • John Jones:1

Suppose John Jones made a contribution is the amount of $100. You would click on the DONATIONS tab on the home page and in the CUSTOMER:JOB enter John Jones:1. You would enter the appropriate ITEM to get the donation to post to the correct revenue account., and you would enter the amount of the donation, how paid and any other information you may want to track. [Iím not going to raise the issue of whether or not you use CLASS to indicate whether the donation is for Program Services, Fund Raising, General Overhead, or has no donor restrictions imposed.] When John Jones makes another donation, you would enter a second job to track the donation amount. You would then haveJohn Jones:2 in your drop down list.

Is this how you do it, or do it differently? If you do it differently, please show each step you enter when recording the donation.

[Letís make sure we agree on this step before we go any further.]
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