CNA L&P - Dedicated Accounts: How/when to use a dedicated account

How to use a dedicated account

Dedicated Accounts are used as in-and-out accounts. Donations to these accounts are treated the same way an Income would be treated, as a Credit to the Account. Payments from these accounts are treated the same way an Expense would be treated, as a Debit to the Account. When you close the year, the Balance of a Dedicated Account would be brought forward to the next year. 

This is in contrast to using Entities where Income and Expense Accounts are used to track monies allocated to a specific entity (or fund) and at the close of the year the software calculates the new year's beginning balance (Balance at beginning of yyyy + Income - Expense = Balance at beginning of yyyy+1).

Dedicated Accounts are used for the purposes of tracking Designated and Restricted Net Assets.  
 
These are monies that are either: 
 
  • Designated for a specific purpose (i.e. Second Collection) that will be received then turned around and sent to a parent organization or others, or 

  • Restricted by a Donor's intention which includes the categories of: 
    • Temporarily Restricted, where a period of time or purpose releases the restriction (i.e. Capital Campaign), or 
    • Permanently Restricted where there is no time/purpose release of restriction (i.e. Scholarship) and the church is only allowed to use the interest income and not use the principal

 Create a Dedicated Account as you would any other Account except the Account Type would be Dedicated.

The effect of Debits and Credits on Dedicated Accounts:

Typical Account Typical Balance Debit Effect Credit Effect
Memorial Fund Credit -Decrease +Increase

 

For information on how reporting for Dedicated Accounts works, please see our Help File Article titled Alternate Method of Recording/Reporting of Dedicated Accounts for Additional Detail

 

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