Reserve Fund accounting

I have a reserve fund which sets aside money specifically for repairs and maintenance to community amenities. This is currently set up in QB as a long-term liability.  When an expense occurs, I run it through a sub-account so it only shows up on the balance sheet. At year-end, the total fund amount plus any income and expenses for the year, is shown at the bottom of the P&L. Since this money is separate from the operating budget I don't want it to show on our monthly P&L. Is this okay or is there a better/correct way to do these entries?

Answer

The reserve balance should represent funds you received to the bank in earlier periods that were not counted as Income at that time.

When you incur the expense, you incur it as expense for maintenance and repairs.

Then, you open the Liability account register and post the same amount to Income, reducing the liability balance. Because now you have "earned the money by using it for the purpose it was set aside for."

An easier way to do this entry to see the data is to use the Write Check, on the Expenses tab, you list what you paid for, for the repair. Then, on the next two lines, you use:

Liability account = same total here as the whole check

Income account = same total here but as a negative; name the income account "Recognized Income" or something obvious

These two entries offset each other and don't affect the Expense account or the bank account entries. But now the satisfaction of the liability is easily tied to the transaction for the expense.

I don't know anything about why you mention using a Subaccount so it only shows on the Balance Sheet or not showing on the P&L. I don't know what you are trying to do with these concepts.

Was this answer helpful? Yes No
Original
AllStar

No answers have been posted

More Actions

People come to Accountants Community for help and answers—we want to let them know that we're here to listen and share our knowledge. We do that with the style and format of our responses. Here are five guidelines:

  1. Keep it conversational. When answering questions, write like you speak. Imagine you're explaining something to a trusted friend, using simple, everyday language. Avoid jargon and technical terms when possible. When no other word will do, explain technical terms in plain English.
  2. Be clear and state the answer right up front. Ask yourself what specific information the person really needs and then provide it. Stick to the topic and avoid unnecessary details. Break information down into a numbered or bulleted list and highlight the most important details in bold.
  3. Be concise. Aim for no more than two short sentences in a paragraph, and try to keep paragraphs to two lines. A wall of text can look intimidating and many won't read it, so break it up. It's okay to link to other resources for more details, but avoid giving answers that contain little more than a link.
  4. Be a good listener. When people post very general questions, take a second to try to understand what they're really looking for. Then, provide a response that guides them to the best possible outcome.
  5. Be encouraging and positive. Look for ways to eliminate uncertainty by anticipating people's concerns. Make it apparent that we really like helping them achieve positive outcomes.

Select a file to attach: