Introduction to Nonprofit Accounting the Basics

listen to music. Do you want to sit and talk about QuickBooks? Right. Uh and so that's what we are going to do. Um we have a couple of people with us on the line um that are going to be kind of in the background. Artha Simmons with Tech Soup is here and we know and we love her. Area, do you want to wave to people at least? She's See if she I'm going make her turn her camera on and wave. >> I put I put the heart emoji. >> Okay, there we go. There she is. There she is. Then uh Bill Sims is with us and he's uh with QuickBooks Made Easy. Uh and he is director of operations and marketing and everything except teaching QuickBooks. That's me. Uh so uh myself uh I am a CPA um with a uh specialty in nonprofits and um I've been teaching nonprofits uh how to use QuickBooks for probably 20 years now. Uh, and I am kind of curious to see I'm going to do a little poll here. Um, have you seen me teach before? Uh, and it's either a yes or a no. Uh, so I'm just kind of curious to see who's seen me teach and who has not. Uh, it looks like most of you are new uh to seeing Greg Boston teach, which is kind of cool. Uh, and uh, so that's cool. We've got 114 people in the room here now and we're going to learn about nonprofit accounting. Now, I usually teach QuickBooks. Uh I also teach accounting. Uh but everything I teach is always nonprofit related. Uh I'm a CPA. I specialize in nonprofits. Uh having a a CPA firm in Atlanta, Georgia, but we do audits of around 40 nonprofits around the country. We do around 2009 990s. Uh, one of the places that you can get a 990 done for you is Tech Soup. Uh, we have we offer our Tech Suit we offer on Tech Soup's platform to do your 990 at vastly discounted rates and we'll point that out uh later uh if you are interested in getting that. But you want to make sure that you like me first, right? So, um, uh, anyway, so, uh, I, uh, teach people how to use QuickBooks with QuickBooks Made Easy. And then I also have my accounting firm. So, my accounting firm is all nonprofit-based. And then I have QuickBooks Made Easy. I'll take you to the website here. Actually, I'm going to go ahead and stop sharing, but looks like most of you have never seen me before teach, which is kind of cool because I'm not your usual trainer. Uh but anyway, here is uh the QuickBooks Made Easy website. Let me go over to it here. And uh it is right here is the QuickBooks Made Easy website. Uh we actually have a 3-day webinar series uh coming up in November that you can purchase a ticket for again through Tech Soup. And uh we're going to teach you all the nuts and bolts of how to use QuickBooks if you are a nonprofit. Uh, however, you got to see whether or not I can teach before you decide to take that. Okay. So, uh, that is coming up. So, let's, uh, let's get started here. So, um, again, you seem to know where the chat is. Um, I'm not going to be able to look at the Q&A, so if you have questions, just put them in the chat, not the Q&A. Um, this is our team at QuickBooks Made Easy. Um, I have a separate team for my accounting firm, but I'm teaching under the opices of QuickBooks Made Easy today. And, uh, that's just more about me, which we already discussed. Um, uh, this is our 3-day webinar series that's coming up. I'm going to, uh, tell you where to go to sign up with Tech Soup for that. Uh, this is a help desk. Uh, and then, uh, this is your 990. So, um, Karen wants to know if this is going to be entirely US focused. So, I'm going to teach you accounting. Um, I think it'll be fine, uh, for somebody that's Where are you, Karen? Are you in Canada? Because I think it'll be fine for you that are in Canada as well. Um, yeah, I think you'll be fine with that. Um, I think you'll be fine. All right. So, uh, let's see today's agenda. So, normally when I teach, by the way, I take a break every 45 minutes, but we're only teaching for an hour. So, um, we're going to go ahead and go straight through, but I'm going to try and keep it as interesting as possible for you. Okay? So, what we're going to do today first is we're going to define accounting and how it works. All right? uh and I'm going to teach as if you don't know the first thing about accounting because again if you're a nonprofit a lot of you are probably throwing your through got thrown into this thing where it's like oh I need to do all the administrative tasks of my nonprofit and that includes doing the bookkeeping right and so it's like well wait a second I didn't take bookkeeping in school and now suddenly you're doing it this happens to a lot of small nonprofits uh and uh and yes you will get this recording uh it will be available to you. You will also get the PowerPoint deck. So, someone had asked that in the chat. This is just me kind of showing that yeah, if you put something in the chat, you're going to you're going to get an answer from me. So, it's kind of a way we can talk back and forth. Um I can also just open up the uh participant and I can actually just call out somebody like Brenda Newton. Brenda, are you here? Put something in the chat if you are here, Brenda. Um, Brenda, are you here? See, this way I know that you have to pay attention. All right. So, we're going to define accounting and how it works. We're going to look at the financial statements, uh, the two main financial statements that kind of make up accounting, and we're going to read them, teach you how to read them and what they say. Uh, then we're going to talk about what specifically I think you should be giving your board every single month. And yes, you should be giving your board financial statements every month, not every quarter. Some of you, the board only meets every quarter. I still want you to give them financial statements every month. Okay? Um, and then we're going to get a little bit more detailed. Um, there are people that understand accounting in general, which you will in a few minutes, but when it comes to accounting for a nonprofit, it's actually more complicated than a regular business. There are actually three things you need to track when you enter a transaction as opposed to just one thing you need to track if you're just a regular business like I don't know a doctor's office or a pizza joint or something. Um there are three things you need to track when you're a nonprofit. It's a bit more complicated. Um uh let's see. So Rose, you put in here how to reconcile discrepancies from prior year. So uh is that something you need help with? Because that's not what this webinar is for. But I can certainly help you with tech support on that. Um, so, um, after I cover these three things that you need to track, I'll talk about how to use QuickBooks to track these things and then I'll tell you where to go, uh, to get some more information. Okay. Uh, something's just come up. The recording will be there. Retha, I don't know if it's going to be emailed or not. Um, this literacy person has to leave, so they may want the recording emailed to them. I don't know if you email it or if it's just available on your website. All right. So, everybody can hear me. Oh, yeah. They're going to email it to you. So, you're good. So, everybody's going to get the video emailed and it's on YouTube. Okay. So, can everybody hear me? Well, I want to make sure that I my microphone is good and y'all can hear me and everybody can see me. All right. And everybody can see the screen. You should be looking at the first topic, which is what is accounting. All right. We ready to rock and roll? Somebody tell me to get moving and I will start teaching. This is yet another way I make sure that you're actually There we go. Okay. Thank you. All right. So, here we go. So, what is accounting by Greg Bosa? All right. So, this is uh a very kind of 5 to 10 minute 101 on what accounting is. Okay. So what accounting is, it basically is the process of entering transactions and it used to be you enter them on a columnar pad like on a sheet of paper. Now you enter them into a software package but you enter transactions, checks, bills, deposits, what have you. And what happens is they appear in a list called the chart of accounts list. And then the lines in that list make up two financials. Okay, that is accounting. All accounting is is entering transactions. So they end up on two financial statements. Okay, one of two financial statements. And then you use those statements to analyze your organization, see how it's doing, hopefully compared to a budget and uh make plans for the future. So that's all accounting is is the process of entering transactions so they get on the two main financial statements. So we're going to go into QuickBooks. I'm going to be using QuickBooks here when I look at the financial statements, but you might be using something else, but tell me in the chat here, what are those two financial statements that really make up and show all of your transactions? Um, what are those two financial statements in accounting? you probably know them. Just put them in the chat. Um Diana says the statement of activities. Um some people call the statement of activities the P&L. In the nonprofit world, we call it the statement of activities. Um but it's also called the profit and loss. I saw a couple people call it the income statement. So that's all that all of that is right. Okay. Statement of activities, profit and loss, income statement. That's one of the statements. Okay. What's the other statement? I saw a bunch of you put balance sheet. That's the other statement, the balance sheet. Okay. Does anyone know uh the name for a balance sheet that nonprofits call it? Like a P&L is also called a statement of activities. A balance sheet for nonprofit is also called a statement of financial position. That's correct. That's correct. And so all accounting is is entering transactions. So they end up on these two statements. the balance sheet and the profit and loss. Now, I'm going to try and get both of these on the screen at the same time so that you can see them. Going to move this P&L over. Um, hold on one second here. Okay. So, let me make this small. There we go. And here's my balance sheet. Since I'm sharing my screen, it's gets a little wonky here, but I want to try and make it to where you can see both of these reports because this is all accounting is is entering transactions so they end up on one of these two reports. Okay. So, this is the Let me move this over just a little bit and move this back so that you can see it better. Okay. And let me just move this down. And I'll move this down. And then we were all good. All right. Okay. Here's somebody came in late. I asked him which the fin what the financial statements are that make up accounting and Vicki answered Orlando. Okay, which might be the last that was my last question which where you visited. So anyway, welcome Vicki. Maybe you just got here. All right, so this is the balance sheet and this is the profit and loss. If you happen to be using QuickBooks, yours might say under balance sheet it might say statement of financial position. It's the same thing. The P&L it might be called the statement of activity. It just depends of how you set up your books. And all accounting is is entering transactions. So they end up on these two reports. Okay. Now, they get there by a list called the chart of accounts list. And the chart of accounts list is just a listing of all of the accounts that make up these financial statements. Okay. So, I'm going to actually open up a chart of accounts list and I'm going to pull it up so that you can see the chart of accounts list so that I can just kind of easily and and visually show the relationship between the chart of accounts list and the financial statements. And you'll forgive me if some of you already know this stuff uh and you're like, gosh, Greg, I already know about this. But there are a bunch of you that don't, which is kind of why you're here, to learn about accounting. So, have to be nice to these people that don't know. Um, I'm going to go to the chart of accounts list now. So, here's the chart of accounts list. All right. So, the chart of accounts list is the backbone of the entire accounting system. And again, just going back to our little slide here, all accounting is is entering transactions. The transactions hit at least two two accounts, maybe more, but at least two on the chart of accounts list. And then from there, they go on to the financial statements. And by the financial statements, I mean the profit and loss and the balance sheet. Okay, so that's all accounting is. Let me get this uh uh the chart of accounts up again. All right, so all accounting is is entering transactions. So, they end up on these two reports and they get there by first going through the chart of accounts. Now, I'm going to I know I'm hammering this home for those of you uh that are kind of new to accounting. I'm going to push a little further. I'm going to say this again. I'm going to slow it down and going to open up another uh screen here. Again, all accounting is is the process of entering transactions. So no matter what your software package is, I know most of you are using QuickBooks, but whatever whatever your software package is, to enter a transaction, you just go to this create button in QuickBooks. And let's say we do a check. Okay. Now, as I said, every transaction hits at least two accounts in the chart of accounts list. And you'll see when you fill out a check here, you put the bank account. That's one of the accounts in the chart of accounts list. And then the other account is down here. And since this is a check, you'd probably put an expense account. Okay? Like, I don't know, rent. Okay? So, you'll see every transaction hits at least two accounts in the chart. One's the checking account here. That checking account is going to go down. One is the expense account here, and that expense account is going to go up. When I go to the chart of accounts list, you will see the checking account is one of the accounts that appears. And if I scroll down to where the expenses are, you're going to see rent is one of the accounts that appears. And finally, when I look at my financial statements, you will see the checking account is one of the accounts that appears. This is weird. That's negative number. But and then if I go to where the expenses are, let's scroll down here on the expenses. You'll see rent is one of the expense accounts. So that's accounting. You enter transactions. They hit at least two accounts in the chart and from there they go on to these financial statements and then you look at these financials and you use them to make decisions about your business. That's accounting. Period. Okay. Now, I know there's other reports that you need, but these are the two main reports, the balance sheet and the P&L. So, I want to define for you and kind of help you understand what the balance sheet and what the P&L is telling you. Okay? So, the balance sheet, and I'm going to make this account this uh big and maybe I'll make this a little bigger so you can see it. Can everybody see the balance sheet? Y'all put me in the chat. Say something in the chat. I know. So, the balance sheet is called the balance sheet because it has a top part 114,641 and a bottom part which also equals 114641. The balance sheet has a top half and a bottom half and they always equal or balance. And that's why it's called a balance sheet. Okay. The top half is made up of assets. Assets is all the stuff that you got. Now what you have changes from day to day in this life, right? Same thing with your organization. So this balance sheet is as of a certain date in time. It's almost like somebody took a camera and went click and took a picture of your organization and the balance sheet is a snapshot of that picture. This picture was taken on June 30, 2030. Okay. So, yes, I'm speaking to you from the future. Anyway, so on June 30, 2030, what did we have? We have some money in the bank. We have a receivable. We have some fixed assets. Total amount of the stuff we have 114,000. That's really good information that a board should know. Every month they should know how much stuff you had at the end of the previous month. Okay, so here we are in September. So pretty soon you should be reporting for August to your board and you should give them a balance sheet or a statement of financial position. The bottom half, okay, if the top half app is made up of everything you have, the bottom half is made up of two parts. One part is everything you owe on the same date the picture was taken. Okay, we owe 46,000 in liabilities. We have some payables, some payroll liabilities. We have a loan at a bank. We owe 46,000. So, we have 114,000 of assets and we owe 46,000 in liabilities. The difference is called equity and it's 68,000. Now that's why well you the the top half and the bottom half are always going to equal. Okay? So in other words if you take assets you subtract out liabilities equity is simply the difference between those two which is why it's like an algebra equation which is why the balance sheet always equals. So, a way to look at it, it's like, okay, 114,000 is what I had on June 30, 2030, but I owe 46. So, if I went out of business, I had to pay I would have to pay off the 46, but then I've got 68,000 left over. So, I like to think of equity as kind of what's left over. Okay? And another way of thinking about equity, some people call equity net worth. It's like kind of what I'm worth on paper. Okay. Anyway, it's like, well, I have these assets, but I have these liabilities, so what's left over? I guess is what I'm worth. 68,000. So, that's another way of defining net worth. And this equity, the way to Well, let me ask you a question. Would you want this equity number to be positive or negative? What do you think? Do you want the equity number to be positive or negative? This one's positive. Yeah, you'd want it to be positive. If this is negative, if equity is negative, what does that mean? If it's negative, what does that mean? Think about it. Say assets were 114 but liabilities wereund or 200, then this is negative. So what it means is you have more liabilities than you do assets. You owe more than you have. That's not good. Okay. And so we want this thing to be positive. Now the only way to make it positive is to earn more than you spend, right? And so another way of looking at this equity is it's really the summation of all of your activity from the beginning of time up until June 30 of 2030. In this case, it's the summary of all the activity. And because it's 68,000, that means I generated 68,000 more in income than I had in expense. That's what it means. It's basically the sum of all of your P&Ls. So, a way of looking at it is like, okay, let's see. I've worked for 20 years in the nonprofit. I earned money. I spent money. I earned 68,000 more than I spent. So, that's good. I have 114,000. How do I have 114,000 if I only earn 68? Oh, it's because I borrow 46. There's 46 I haven't paid yet. Okay, so this is also called a statement of financial position because it's basically telling us what the position that I'm in right now. What position am I in right now? Well, you have 114,000 in assets. You owe 46,000. and what's left over or what I've earned from the beginning of time that I haven't spent yet is 68,000 bucks. Okay, does that make sense to y'all? What do y'all think? Okay, do you see how important a balance sheet is? But it doesn't say anything about what happened during a given period of time. All it tells you is this is what I have right now. this is what I owe right now and this is what's left over. It doesn't tell me how I got there. Okay, so the other report which we've already discussed which we you already guessed is the profit and loss. So the profit and loss is the other main report. Okay, here it is. And it has two parts as well. It has a top half with the money coming in. That's 264. And it has a bottom half, money going out, that's the expenses, 254. And hopefully you earn more in revenues than you spend in expenses, and you'll end up with a positive number, 98.69. So, but this is as of a certain time period. Now, I made this be for July 1 of 29 through June 30 uh 2030. this nonprofit their year end is June 30. So that's why I did it that way. Um so but you can change it and for make it whatever time period you want and then it just gives you the activity during that time period. So what you're supposed to be doing is you're supposed to every month you're supposed to look at the P&L for the beginning of your fiscal year through the end of the of the previous month. So if your year began January 1st, then you'd look at a P&L from January 1st through August 30th. That's what you'd give your board. Probably compare it to a budget. That would tell you what happened during the current year. What money came in, what money went out and what's left over, 9,800. But it doesn't tell us how much money is in the bank. It doesn't tell us what position we're in as an organization. It only tells us that the current year increased our position by 9,800. Well, that's fine, but did we start in the hole and now we're less in the hole? Or did we start really good and now we're better? So, that's why you have to look at the balance sheet to get that information. Okay? So the balance sheet kind of tells you what you look like now and the P&L kind of tells you how you got there over a period of time. All right. Now, I'm going to say one more thing that's a little hopefully this won't be too confusing for you, but if you notice the bottom of the P&L, I've earned $9,800 for the year ended June 3030. When you look at the balance sheet, that $9,800, that's your earnings, that's your revenues, less your expenses for the current year or the year that just ended. But the P the equity has all the P&Ls from the beginning of time. Notice how the current year sorry um notice how the current year is its own line net income. These other lines in the equity section those are all the prior P&Ls. This is the current P&L. Okay? So, you really could just look at the balance sheet and it would tell you what you have, what you owe, and what you've earned so far this year. But if you want the details of the revenues and the expenses that made it up, you go to the P&L. Okay? So, that's accounting. You simply enter transactions. Every transaction hits at least two accounts in the chart of accounts and then ends up on the financial statements. We've got time here. I'm going to do one more little thing. I'm going to test you. Okay. I'm going to test you. Um. Uh-oh. I think my nonprofits is still too small for this. This seems like Chinese. So, Andrea said that. So, we got to stop. Andrea, tell me what is it that is confusing for you here. So, why don't you think for a second and put something on uh in the chat and then I'll Oh, she says she wants to get with me oneon-one. Okay. So, I think I'm going to say this, Andrea, and you may not be the only one. It may be that your nonprofit is so small that all you have is a bank account. So, when you look at the balance sheet, all you have is a bank. It still works. I have a bank account with $2,000 in it and 2,000 is earned because I've made more than I spent. And so your revenues less expenses are also $2,000 from the beginning of time. So that'll be what the equity section is. You may only have two lines on your balance sheet. Okay. So, and that's perfectly fine. Ken says, "My nonprofit's property value, the office, is considered to be an asset to be accounted for in the P&L statement." No. No. So, um, what goes on the balance sheet is assets. And assets is comprised of money, receivables, and fixed assets, things that are big enough in dollar amount. and also big enough in that they're going to help you for more than a year. Those things are called fixed assets. One of those would be a building. And you when you buy a building, you wouldn't expense it. You would put it as a fixed asset. Okay? It should be a fixed asset which is an asset. You simply exchanged one asset cash for another asset building. Okay? And so you should not be expensing those. Okay? So, do funders expect more in reports from nonprofits than spreadsheets? Absolutely. Spreadsheets are a nightmare. Okay. Uh Beth says, "How do we add fixed assets into QuickBooks?" So, I want to teach the course and then we'll see if we have time for questions afterwards. A little bit much uh for me be able to do that. Okay. So, um I'll look at this one more question. Can you say more about the profit and loss? I understand the balance sheet but not the profit and loss. Okay, let's look at the profit and loss. I'm sorry if I went quick. This is a statement for a period of time. It's like a movie of transactions going in and out of your bank account over a period of time. So, this statement was done from July 1 of 29 through June of 2030. I could pick any date I want. I just pick that date range. Notice the difference. This is a movie of transactions going in and out. Whereas the balance sheet is like a snapshot at a point in time. The profit and loss is like a movie of transactions. So I worked for a while, money came in, money went out, money came in, money went out. That's the P&L. As a result, the balance sheet tells me these are my assets, this is my liabilities, and this is what I have left over. Okay? So, it's kind of like the P&L is like the journey and the balance sheet is the destination. All last year, I got in $2864,000 in revenues. I spent $254. I added $9,800 to my net worth. Okay. So, does that help you, Hermela? Does that help you? Does that make any more sense? Yes. Okay, cool. Kathy, these digits in the back, these are account numbers. Sometimes accountants decide instead of having just names, they use an account number to help with data entry. You don't have to have it turned on. Uh you can keep it turned off in QuickBooks, but instead of it being called telephone, we also call it 6340. It's a madeup number that you can pick. Okay. Um the balance sheet is for the lifetime of the organization. That's right. Through the date that you are the end date on the report. This was 6:30 2030. Whereas the P&L is a period of time such as 12 months. That's perfect. All right. So I think we've done pretty well here. Um, I'm going to do one more thing and then we're going to move on. Okay. I'm going to actually walk through a transaction so you can see how it affects the financial statements. Okay. To kind of prove out this slide that all transa all accounting is is entering transactions. So they end up on the financial statements. They go through the chart of accounts. Okay. and then they go on to the financial statements. So, what I'm going to do is do I still have that transaction window pulled up? I don't know if I do. Um, yeah, I do. So, let's say I'm going to write a check for rent. Well, no, for office supplies. Let's say I'm going to write a check for office supplies. Okay. for $10,000. What are the accounts affected? Somebody tell me in the chat. If I write a check out of a bank account to pay for rent, what are the accounts that are affected? Put it in the chat. According to my rule, at least two accounts need to be affected. The checking account is one and the other one is office supplies. That's right. Everybody has it. So, what I'm going to do is I'm going to fill out this check. I'll pay Alex Thomas, we'll say. I'll pay out of this bank account 72.95. And I will point it to rent. Rent. And I'm going to make it $10,000. And I'm going to save it. Oh, I'm sorry. You're right. Office supplies, not rent. Let me fix it. Okay, save it. All right. So, now if you look at the balance sheet right now, the checking account says 64,000. I'm going to refresh it to reflect the fact that I wrote a check. Oh, I'm Did I say rent? Adora, let's just change it to office supplies. We wrote a check for office supplies, not rent in my example. I apologize. Okay. Um, I'm going to refresh the screen. Let me go back to the check. Make sure that I did this right. Here's the check. $10,000. I paid it out of 629. Uh 72.95. Um let's make it 20 instead. And then I'm going to save it. It went out of 72.95. It's $20,000. I'm going to go to the balance sheet. And you'll see right now the balance sheet says 64,000. And I'm going to refresh the screen and let's see if that 64,000 changed. It did not change. Why didn't it change? It should have changed. Oh, I know why it didn't change. Because this data file is a is a file that has expired. So, it won't let me record transactions. I forgot about that. So you will just have to you'll just have to trust me that if it record if it would have recorded the transaction that 64,000 would have gone down to 44,000 and then so your checking account would have gone up down I mean what would have happened to office supplies would it have gone up or down? It would have gone up. Okay. So you know how to do accounting. You actually know how to do accounting. Now, I'm going to do one more little one. Okay. Does anybody invoice customers in this room? Does anybody invoice customers in the room here? Does anybody invoice customers? Okay. So, if you do invoice customers, QuickBooks has a little screen called invoice that you can use. Okay. So, when you do an invoice, and yours might be called pledge, but when you do an invoice, let's say we're invoicing for a membership fee. Okay? What are the two accounts get that get affected when you do an invoice in QuickBooks? Tell me for a membership fee. What two accounts get affected when you do an invoice for a membership fee? What are the two accounts that get affected when you do an invoice for a membership fee? One of the accounts is accounts receivable or grants receivable here depending. Okay. Uh now Robert deposit check bills paid. No, Robert, we didn't get any money to deposit. All we did was an invoice, Robert. Okay. So, try again. Okay. When you do an invoice, receivables go up. And what's the other account that goes up? Lori already said it, but somebody else say, "If I do an invoice for membership, what's the other side of the transaction?" Donna says payable. So, Donna, listen very carefully. I'm invoicing a customer for memberships. They owe memberships. Okay? They owe me a membership due. Okay? So, it's revenue to me. So, I enter an invoice. So, receivables go up. The other side is No, David, it's not assets. Let's David said, "Try this again." Uh, it's not a liability. No. No. If I invoice somebody, a customer, it makes receivables go up. And then the other side of it is income. I've earned income. I haven't received it yet, but I've earned income. So, the majority of you got it right. It's membership dues income. So, maybe you were just looking on the balance sheet and looking for an account, but it goes to this membership dues on the P&L. Often times when you enter a transaction in accounting, one side goes to the balance sheet, usually lowering or increasing the bank account, and the other side goes to the P&L, either it's income or expense. Okay, Zivio, does income go up if using cash basis or only acrruel basis? So, Zevio points out that if you do an invoice, it's only going to make income go up if your books are on the acrual basis. But anybody that does an invoice is obviously on the acrual basis. Okay. So, um we got a little bit stuck there because I think there were some people that are a little confused, but hopefully you feel a little better. Um, uh, should you not use invoicing if you're on a cash basis? Well, that's an interesting question. Um, I think I want to talk to you oneon-one, Joanne, about why you consider yourself on a cash basis. Is that just for tax purposes? Um, you can still do an invoice, but if you're in the habit of regularing invoicing people, I would assume that you're reporting on a cruel basis. Okay. So, maybe we need to talk about that a little bit further. So, we got about 20 minutes left. Um, and I'm going to move on to teach just a couple of more things. Uh, and then we'll finish up. Okay. But I just want to say again, I'm just going to point this out. What is accounting? The process of entering transactions. Every time you enter a transaction, it makes two accounts get affected in the chart of accounts. Maybe more, but at least two. And then from there, the lines those accounts are, they go on to the financial statements. Okay? And so that is accounting. And um the two financial statements, the balance sheet and the P&L, those are the main financial statements. That's what you should be giving your board. Okay, every month you should give your board a balance sheet and a P&L. Okay. Now, the balance sheet, let me go back. Let me show you what you should be giving your board. You should give your board a balance sheet. But the balance sheet, it should be created after you've made sure the numbers on the balance sheet are correct. Okay? And that's kind of part of what we teach during the three-way webinar, 3-day webinar series. We try and explain to you like what these accounts, uh, how to set them up, what your accounts on the balance sheet should be, how to make sure they're correct, and also how to reconcile them before you give this balance sheet to the board. The other thing I want you to understand is you do it through the end of the previous month. Okay? So, you wait a couple of weeks until you've got your bank statements in, you've got everything reconciled. I mean, the bank accounts reconciled. You look at a balance sheet as of the end of the previous month. You make sure it's right. And then you give it to your board. And what I like to do is compare it to the same date a year earlier. So if you notice here, I've got June 30, 2022, but next to it I have June 2000, June 30, 2022. So it's kind of interesting to see. Well, last year at this time we had 70,000. Now we have 270,000. Okay. So it's it's just an interesting exercise to it's a it's a it's a it's a good way of analyzing your statement of financial position. Now, well, how do I know if it got better or worse? by looking at it as compared to a year ago. So, I definitely think you should do that. Um, should the reports be for the full I do the full year to date. Now, you could do a separate P&L just for the one month that just ended, but I need a full year to date as well. The balance sheet is as of a point in time. So, it's always at the at the um at the uh the the last date of the previous month. And when you do a balance sheet in QuickBooks, if you do QuickBooks, notice there is a from date and a to date. This from date is irrelevant. It shouldn't even be here. It's the two date that matters. See, this says as of June 30. So like look at this. This says 114,649. If I change this date, you know, I don't know, 0630 uh 22, whatever, it doesn't matter. The number is still going to be the same. Okay? Because it's the end date. Okay? It's the same number 114641. Okay? So, the P&L is the other report that you should give your board. And the P&L should be compared to a budget. All right? So that you can see how you're doing compared to a budget. Okay? So, um, create after you've ensured the numbers are correct. Create through the end of the previous month. And this is the question that somebody was asking. I like to do a year-to- date ended the date of the previous month. So if your year end is December 31, then your report that you would give to the board this month would be January 1 through 831. If your year end is June 30, then the report that you would give your board would be July 1 of 26 through um August 30 of 26. Okay. So, uh, or are there 31 days in August? I think there's only 30 days in August. Okay. Uh, so somebody asked why a P&L versus a PTA. I don't really know what a PTA is. I've never heard of that. I mean, when I was a kid in high school, there was a PTA, but I don't know what a PTA is. Um, all right. You definitely want to add a comparison to budget. Um, okay. projects. Neon. So, there's a project feature in QuickBooks, but we use it to track restricted grants. So, I'm not quite sure what you're talking about there because that's not what this course is about. Okay. Um, uh, projected projected to actually I'm confused. Your budget is the the over budget. That's what you have left. I'm a bit confused on that, Neon. All right. So, uh, the last thing that I want to teach you is that there are three things that you need to track when it comes to, uh, entering transactions. If you are a nonprofit, uh, there are three things that you need to track, not one. There are three of them, and I'll point them out in one second. What if I'm using classes for my budgeting? There's nothing wrong with using classes for your budgeting. That's not a problem at all. um you just run a budget to actual for all classes and then you just have one total column. You just have one total column. You don't look at it on by class. You look at the total all together. Okay? We cover that in the 3-day webinar series as well. But anyway, there are three things that you need to track when you're entering a transaction if you are a nonprofit. The first one is what every business needs to track when you're entering a transaction. I mean obviously you need to put the name and the dollar amount and the date. I'm not talking about that. I'm talking about the account you have to point it to. Okay. So the first thing that you have to point it to uh is the uh natural category is what I call it. You the thing that readers need to know first about a transaction is what income expense or asset account it goes to. I know one of them is the bank account if it's money that you spent or money that you got. But the other account is what I call the natural category. An example if it was an expense would be salaries and wages or maybe rent or maybe postage. Uh can anybody think of some other natural expense categories that you have on your books? Um I have salaries, payroll taxes, rent, postage, utilities is one, office supplies, telephone, janitorial. That is correct. Those are those are good. Now, the person who said programs, let's see who said that. Zeio, that's wrong. Okay, we should not have the name of a program. That's not a natural category of an expense. Programs are something that we need to track. We're going to use another list for that. Um, we don't but we that's not a natural category. A natural category of an expense is what it's for, what it is. Okay, a program that's like an initiative that your organization. I have the organization I always use is called Synergy Now. And what they do is they're an environmental organization and they have different programs to support the environment. One of them is a guidance center. That's their program. Okay, that's not the natural category. When you spend money on that program, I need to know, did you spend it on supplies? Did you spend it on rent? Did you spend it on postage? Did you spend it on salaries? I need to know the natural category, but you're right. You also have a second thing you need to track, which is what program it was for. Okay? Uh, and it might be the guidance center program. It might be the aware campaign program. See, funders want to know when you spend money. Not only do they need to know the natural category, travel, supplies, but they need to know the why of the expense. Why did you spend the money? Were you doing it in service of a particular program? If so, which program? Sometimes you spend money and it's not for a program at all. It's just for admin. Like for instance, if you buy QuickBooks, you have to pay a subscription fee to QuickBooks. Um you might buy it from Tech Soup, then you only have to pay Tech Soup once a year. It's really cheap. But anyway, the cost of your QuickBooks program, that's not a that's not um your QuickBooks software, that's not a program expense, that's an admin expense. Okay? So your your expenses in particular need to be pointed to a natural category but also either to a program if it's related to a program or admin. And what's the third bucket? There are three buckets in terms of the why of an expense. One is program, one is admin. What's the third bucket? What is the third bucket? The third bucket, there's three buckets that everything kind of goes into. Yeah, Alice got it. It's fundraising. You see, every time you enter an expense in accounting, not only do you have to tell it the expense account, which is supplies, travel, what have you. But you also got to tell it whether it was a program expense or an admin expense or a fundraising type expense. Okay? And to prove to you that you definitely need to be doing this, when you fill out the tax return for a nonprofit, it's called a 990. When you look at the expenses on the tax return, they have to be reported in this grid where the row is going to be the natural category like I don't know accounting, payroll taxes, here's salaries, here's office expenses, here's occupancy, here's travel. That's the natural category. But then they have to be put in one of these three columns. program, management or fundraising. Management in general is another way of saying admin. So that's why I'm saying you also have to track whether it's a program and if so what for admin and then the last one is fundraising. Okay. Now the third thing there's a third thing you need to track if you're a nonprofit. So we're up to two now. We got one more that we got to go. Does anybody know what it is? When I enter an expense, I need to tell my accounting software what is the natural category of the expense, supplies, travel, what have you. I also need to tell the accounting software whether it's for a program or admin or fundraising. And what's the third thing we need to tell? Now, who you paid is obvious. The bank account it went out of. That is obvious. The grant. Thank you. The third thing you need to track is who paid for it. Okay? If you paid for it out of a grant, we need to tell QuickBooks what grant we paid it out of or whatever my accounting software package is. Okay? So, those are the three things that we need to track. And in QuickBooks and in most accounting packages, when you enter a transaction, I might have that transaction that I had already up. Yeah, here's where I entered that transaction here. Where? Whoops. Okay. Where do you tell it what the natural category is? Over here. Right here. I put it to office supplies. There is a field in QuickBooks called class. This is where you tell it whether it was for a program and if so which program it was for or admin or fundraising. And yes in QuickBooks some of your expenses will be split between different uh programs. So you know I picked the same program here. We'll do that. Okay. And so we have here is the natural category. Here is program admin or fundraising. And that leaves this field right here. If it's paid for out of a grant, you put the name of the grant there. So that's the three things. Okay. Um and I think I have it on the slide here too which you'll be getting. Okay. The natural category that goes there. the program that goes there and who paid for it. Not everybody uses this third one, but if you get grants, you will that goes there. Then what happens is you can run a profit and loss. Let me show you here. I'll go back to my little P&L. Here's my little P&L. And I can run the P&L just by account only, but I can also run it by class. And then I get a P&L. And this isn't what I necessarily would give the board, but then I give a P&L where the expenses are broken out. So I spent $119,000 on the guidance center. I spent $48,000 on the Synergy conference, the aware campaign. I spent$10,000 for Okay. I spent 55,000 on admin and 20,000 on fundraising. I need this to be able to do the 990 right here as well as an audit. Okay, so those are the three things that you need to be putting in your accounting software package. Okay, so um let me just finish up here because I think that's really yeah that was really it. I've shown you a demo um where to go for more info. So, if you are interested in I'm going to skip this and go back to it. We have a 3-day webinar series. It's 2 and 1/2 hours a day for 3 days and it's coming up in November. Okay, it's I think it's the second week in November. And this is um there is if you would like to learn more and you feel like I can teach, well, I need more time, but uh I'll have more time. Normally this costs for the 3-day series including streaming videos that you can get afterwards in and also 3 months of technical support where you can call with questions, you can email with questions and you can even set up appointments and we remote in and help you with your software. Um, all of that is normally $500. You can get it from Tech Soup at $3.49. All right. So, that's one way that you can learn. Some people are like, "No, I just want tech support. I don't want to go to a 3-day webinar series. I just want to be able to set up appointments with you, Greg, and have you look at my books and help me." So, we have through Tech Soup. Normally, it's $199 a quarter. It's only $149. And you can call us, email us with questions. we can go remote in on appointments. It's 24 hours a day, 7 days a week. Um or for a whole year, it's normally $500. You're going to get it from Tech Soup for $3.99. Okay. And then finally, we at uh at uh and QuickBooks Made Easy do 990s. And so if you're interested in getting your 990 done, you can do that from Tech Soup as well. I'm going to go over to Tech Soup's website real quick um so that you can see where did I put that. There we go. Here's Tech Soup. So, if you go to Tech Soup's website and in the search bar, you type QuickBooks Made Easy, you're going to see all of the offerings that we have. Okay. So, the 3-day webinar series VIP ticket is right here. It's $3.49. It's it's three. It It's It says it's a two hour It's a two and a half hour webinar for three days. Two and a half hours for each day. Tuesday, Wednesday, and Thursday. I think it's the 10th, 11th, and 12th of November. All right. Um and you can sign up for it and you're getting $150 off by going through Tech Soup. Um this is the tech support up here. One year and three months. All right. So, um, we've got a couple of minutes left, so I'm going to look to see questions. Okay. Um, we have three accounts in QuickBooks. Can you combine these accounts to create one balance sheet account? So, uh, when you say you have three accounts in QuickBooks, I assume you don't mean three accounts like bank accounts or your chart of accounts list. I'm assuming that you mean you have three company files. Um, you can consolidate them if you get QuickBooks Advanced, which you can get from Tech Soup. Is the tech support for technical issues or bookkeeping issues? It's both. I can answer accounting questions for you. I can help you with a check that bounced and you don't know how to enter it. Your bank account's not working. You need to help. You need me looking over your chart of accounts to see if you set things up right. I can do all of that stuff for you. Okay. Uh, let's see. Uh, my nonprofit is not yet in QuickBooks. Should I wait to get the software before taking the course? I would get the software and play around with it a little bit, but I would not I would not wait. I would take the course in November. Um, Julia, are there standard account numbers for the chart of accounts that we use? This relates to the uh person who was wondering, you know, there's all these account numbers up here. Let me make this total only again. Uh are there standard account numbers like individual contributions is always 4,000 or dues and subscriptions is always 6? No, there is not. Okay. Now, there are is a standard that a lot of people use. Asset accounts usually begin with the number one. Liability accounts usually begin with the number two. Equity accounts usually begin with the number three. And then income accounts usually begin with the number four. And expense accounts usually begin with five or six. Okay. Uh let's see. Uh the previous treasurer put wages as admin. I need to split it between programs. Do I need to split the wages as well? And absolutely you do. That's an example. A lot of people have that issue. They don't split their payroll and then when you do your taxes, it makes it look like you spend way too much money on admin. You need to split your payroll between program admin and fundraising. And people always wonder, well, how do I know whether like how much time somebody spent on program stuff versus admin versus fundraising? In fantasy land, everybody keeps a time sheet, but in the real world, you just have a sit down and you talk to each employee. Usually, the executive director's time gets split. Um, the fund development person is mostly in fundraising. Everybody else is usually all program except for the person doing the bookkeeping, their admin. Okay. Um, let me see. Anybody? I'll take one more question before we finish. I'll take one more question. Uh, anybody got one more question before we let you go? Uh, I don't think so. We still got We still got 93 people in the room. Book recommendations, none. Do not read a book if you're learning uh if you want to learn accounting, particularly if you have Quickbooks. Okay. What you want to do is in Tech Soup, I'll go to Tech Soup. We have a training. It's QuickBooks made easy for nonprofits. The essentials. This teaches you accounting 101 for a nonprofit using QuickBooks. So, it assumes you know nothing about QuickBooks. You know nothing about nonprofits. You know nothing about accounting. And from that vantage point, it teaches you what you need to know. If you try a book, you're going to end up more confused than you started with. All right. Uh, I think we lost sound. Y'all can't hear me anymore. >> Didn't know. You're fine. You're fine. >> Okay. All right. All right. Well, I think I am done. Uh, uh, anybody give me one word about how you're feeling right now about this session. Is it happy, sad? Are you depressed? Are you scared? Are you overwhelmed? Are you nervous? Okay, cool. So, I really want you to think a little bit about this. Pull up a balance sheet, pull up a P&L, and start looking at it. All right. Uh, I really appreciate your time. And, uh, Artha, I'm going to go ahead and let you take us out. >> Look for the recording tomorrow, everybody. Have a great day. Bye-bye.