A church bookkeeper uses Quickbooks. He asks: "How do I set up my Chart of Accounts in such a way that I can easily account for giving and spending?"
He offers the following example. The youth have a budget account for expenses of $500. The actual expenses for the youth was $1,500, but the youth raised $1,000 through donations. "So," he says, "in essence the youth ministry was on budget."
What do you recommend?
I recommend that churches use Designated Fund accounts to record designated gifts and their matching disbursements. This provides good accounting for these gifts, plus it avoids posting income and expenses in the General Fund for which budget accounts have been established. Co-mingling these Funds can mess up budgeting and lose track of designated contributions. Here's the entries I'd recommend in the above example:
$1,000 Debit to Cash/Checking to record the deposit of donations designated to the youth.
$1,000 Credit to Designated Funds: Youth (two new Equity accounts to set up with Youth as a sub-account of the Designated Funds account).
By the way, the account Designated Funds may also have other sub-accounts to account for other designated gifts categories and their subsequent disbursement (e.g., Benevolent Funds).
$1,000 Debit to Designated Funds: Youth to record the disbursement of funds for youth which were made out of designated gifts.
$500 Debit to the Youth expense account in the General Fund related to the church budget.
$1,500 Credit to Cash/Checking.