Church Accounting Icon Systems Inc.

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2 IconCMO Church Software by Icon Systems Inc.

3 All rights reserved. No parts of this work may be reproduced in any form or by any means - graphic, electronic, or mechanical, including photocopying, recording, taping, or information storage and retrieval systems - without the written permission of the publisher. Products that are referred to in this document may be either trademarks and/or registered trademarks of the respective owners. The publisher and the author make no claim to these trademarks. While every precaution has been taken in the preparation of this document, the publisher and the author assume no responsibility for errors or omissions, or for damages resulting from the use of information contained in this document or from the use of programs and source code that may accompany it. In no event shall the publisher and the author be liable for any loss of profit or any other commercial damage caused or alleged to have been caused directly or indirectly by this document. Printed: December 2017 Publisher Icon Systems, INC nd Avenue South Suite G Moorhead, MN Sales: Phone: sales@iconcmo.com Support: Phone: support@iconcmo.com Web Site:

4 4 Table of Contents Part I Introduction 5 1 Getting... Started with Fund Accounting 5 2 Summarized... Instructions and Free E-book 5 3 Setup... the Organization's Information 6 4 Personal... Preferences 7 5 Accounting... Funds 8 6 Chart... of Accounts (COA) 10 7 Entering... Vendors 12 8 Entering... Uncleared Transactions 13 Entering AP or... Checks 13 Entering Credit... Card Payables 14 9 Entering... Items and Customers Entering... AR Invoices Entering... Beginning Balances First Bank... Statement Reconcilation 18 Index 0

5 Introduction 1 Introduction 1.1 Getting Started with Fund Accounting 5 *** The following document was written by Icon Systems, an accounting software company, on how to start the IconCMO accounting module. It is the church s responsibility along with their CPA to interpret these instructions on the use of the software to get the desired results for the church s accounting books and ensure proper account set up. Proper account set up will impact the type of information available, accuracy, tax reporting requirements, and the ease of use within the software.*** 1.2 Summarized Instructions and Free E-book The following is a summarized version of how beginning balances are entered into the system. These steps were added for convenience and in no way replace the detailed instructions in this manual, which every church and their financial advisers should review before entering numbers into the system. 1. Enter a beginning balance date of 12/30/2017 (not 12/31), this is for an accounting system startup date of 01/01/2018. The idea is that the beginning balances be set one day before the checks are done in step 3. Please adjust if you are starting a system on a different day. 2. Enter the beginning balances. The total should match that of the bank statement dated 12/31. In other words, you are setting the system up on 12/30 to what the bank says you have on 12/31. The church decides which funds hold the money. What's at the bank is indisputable as far as a balance and must be the amount the church uses, regardless of what any other software (ie Excel, Quickbooks, etc) says. 3. Next, anything that has not cleared the bank should be entered with a date of 12/31/2017. This date captures anything that the bank does not know about - ie. uncleared checks. This is important, as anything with a date before 12/30 will affect the beginning balance. Anything entered after 12/31 will appear in the financials for 2018 records instead of We are using the 12/30 date to match the bank, then we are inputting transactions (for 2017) on 12/31 to match what the church's checkbook has that is uncleared through the bank. At this point, if you run a balance sheet for 12/31, you should see the same numbers in IconCMO as in your checkbook register at the church. Because this balance takes into consideration uncleared checks, it will not match your bank statement. Only the 12/30 balance sheet will match your bank statement. 4. Move your system to 2018 and enter in all the information for January, When you get your first bank statement, go to Banking: Checkbooks: Reconcile then Set the 'Beginning Balance' to zero. 6. Set the Deposits and Other Credits box equal to the deposits on the bank statement plus the beginning balance on the bank statement. ( Deposits and Other Credits = statement s deposits + statement s begin balance). 7. Enter the rest of the information as it appears on the bank statement like checks and other debits, being very careful not to count things twice. For example, fees may be included in the

6 6 debits, however you already put them in to the service charge field. The ending balance field on the top line should match the ending balance on your bank statement. This is absolutely essential. Then click the 'Save' button, which moves the statement to the bottom portion of the window and can be selected for reconciliation. 8. When you click the 'Reconcile' button and check off all the reconciliation information. It should match the totals in the second line of numbers. All transactions that have the 'BBal' journal type in this window should be checked off in your first statement. If the reconcile balance remaining is not zero, you are missing either a deposit or debit in the transactions or the balances entered in the Fund Maintenance window are incorrect. Because accounting is perpetual, entering the first statement correctly is critical to getting future statements to show correct beginning and ending balances. We highly recommend reading the free e-book on fund accounting to understand the fund accounting concepts. 1.3 Setup the Organization's Information Go to Organization - Setup - Information. Select the First Month in Fiscal Year from the drop-down. This is the first month of your fiscal year. For example, if you are on a calendar year it would be January. If your fiscal year goes from July to June then it would be July. Enter the 'Beginning Balance Date'. o If the fiscal year is Jan. to Dec. and you are beginning the system on Jan. 1st, 2018, then the date should be set to Dec. 30th, We want to leave one day in the previous year (Dec. 31st) to input uncleared transactions before the new year 2014 starts. o If the fiscal year is July to June and you are beginning the system July 1st, 2018, then the date should be set to June 29th, We want to leave one day in the previous year (June 30th) to input uncleared transactions before the new year 2019 starts. In this scenario the fiscal year 2019 actually starts on July 1st, 2018 and ends on June 30th o Another scenario is starting the system somewhere mid year. For e.g., let's say your fiscal year is Jan through Dec., but you're going to begin using this system as of April 1st. In this case your beginning balance date would be March 30th, Again, we want to leave one day in the previous month (March 31st) to input uncleared transactions before the new month starts on April 1st, Next, select the 'Reversing Journal Type' (Reverse Journal, Zero Journal or Delete Journal).

7 Introduction 7 Reverse Journal: This option leaves the original journal alone and creates a new one, negating the entries of the original journal. o Zero Journal: This option zeros the amount fields of the original journal and adds a notation that the journal was reversed, who reversed it, and the date it was reversed. o Delete Journal (not recommended): This option physically removes the original journal from the system and enters a notation in the transaction log file. There will be no other audit trail when this option is used with the exception that a journal number will be missing, giving the assumption that it was deleted. This is best used when first setting up the system where the user may make mistakes and would like them removed, as to not clutter up the accounting books. However, you should choose one of the other two options after set up. Click the 'Save' button. This screen is also where you input the church's name, address, and other information that is used throughout the system. Please fill out this information before clicking the 'Save' button. o 1.4 Personal Preferences Go to Organization - Preferences - Personal. Set the Fiscal Year to work with to the fiscal year that you will be entering in the beginning balances for at this time. Make sure 'View Accounting' is set to YES, then click the save button on the bottom left of the screen when any of these are changed. Note: When setting up the beginning balances, this should be set for the year you are entering the balances in. Review the two examples below and adjust

8 8 the years accordingly for your situation. o Fiscal year that is the same as the calendar year (Jan to Dec) - your fiscal year should be set to the year prior that you want to start the system. If you are starting in Jan. 1st, 2018, then the 'Fiscal year to work with' setting should be 2017 while you enter in the beginning balance and uncleared items. You would change this to 2018, however, before entering Jan 2018 transactions. o Fiscal year that is July to June - If you were planning to start the system in July 2018, then you would set this fiscal year to 2018, as you will be entering the beginning balances and uncleared transaction in the prior month, June, which is part of the 2018 fiscal year. When you are ready to enter in data for the 2019 year starting on July 1st, then change this setting to Accounting Funds Go to General Ledger - Funds - Fund Maintenance There are two different types of Funds that can be created in IconCMO. Understanding the differences is essential to setting up the chart of accounts, funds for contributions and funds for the accounting. It also helps to know which side of the system corrections are made, as both sides work independently of each other within one system. o Contribution Funds Contribution Funds (C-Funds) are funds that people contribute to. Contribution Statements are printed from information that is posted to C-Funds and corrections to people's statement must be made on the contribution side of the system. Contribution Funds are entered through the Contribution module in the Contribution - Management - Cont Maintenance screen. Some differences are: C-Funds go to zero each year, money is not rolled over to the new year, they have pledges, and their balance does not go up and down - only up as money is added. o Accounting Funds Accounting Funds (A-Funds) are funds that are defined by the financial group in the church for the purpose of managing the finances of the church. When a church's financial statement is incorrect, the user will correct the transaction on the accounting side of the system. For example, in addition to the 'General Fund' (which is a required fund) the board might have a Building Fund and a Charities Fund. Some differences: A-Funds' balances roll forward, budgets are put in for them, fund balances go up and down depending on revenue and expenses, they do not zero each year. The Fund Maintenance form is used to create accounting funds (A-Funds) and enter beginning balances.

9 Introduction 9 Two different types of funds: Unrestricted Restricted o A separate 'Statement of Activities' (sometimes referred to as a Profit and Loss statement) and a 'Statement of Financial Position' (sometimes referred to as a Balance Sheet) can be run for each fund defined as well as for all accounting funds combined. Add a new fund: o Enter the Fund Name. o Select the Status and Fund Type. o Press the Add button. o Fund names can be modified anytime. A fund cannot be deleted once dollars have been posted to it, however, its status can be set to 'Inactive'. Once the status is set to Inactive the fund will no longer appear in any drop down boxes. The fund will appear in financial reports provided activity had occurred during the date range specified. Below is a conceptual illustration how funds work with the Chart of Accounts (COA), with all of them under the authority of the organization. The funds oversee the COA - not the other way around. For example, the checkbook is not assigned to just one fund. It's the funds that keep track of how much money each has within the checkbook. IconCMO runs reports at the fund level. All funds share the same COA, therefore it is quite possible to have one revenue account tracking the revenue for the Building, General, and Youth Funds. The church would still know exactly how much revenue came into one revenue account as reports are created based on each fund. Think of funds as an additional layer of reporting.

10 Chart of Accounts (COA) Go to General-Ledger - GL - Chart of Accounts. Use this form to view the chart of accounts, rename an account, delete unused accounts, inactivate accounts, move an account or create new accounts. The first time this window is opened, you will notice the existence of some accounts even though you may not have entered any. These are the minimum list of accounts which are required by the system and cannot be modified. You will also be given an option to install a default chart of accounts. Accounts that are not required, can be renamed or removed. This is indicated to the right of the accounts under the 'rqd' column. If there is a 'N', that means it can be modified. If it's a 'Y', it's a required account and can't be modified, however sub-accounts can be created. All accounts except Net Assets (Funds) are entered using this window. Funds and their beginning balances are entered into the system using the Funds Setup form located under 'General Ledger - Funds - Fund Maintenance'. o Funds are the Net Asset accounts and can't be directly affected with journal entries. The Net Assets (Funds) decrease or increase based on transactions like writing a check for an expense item or entering in revenue. In this process, you assign the transaction a fund that is affected, therefore making its balance go up or down. Funds aren't to be confused with the accounts for the debit and credit disbursements. IconCMO has a single chart of accounts defined and every fund has access to every account. For this reason we strongly recommend that account names be

11 Introduction 11 kept generic. For e.g. Office Supplies - General and Office Supplies Youth should be replaced with one account Office Supplies. IconCMO allows for accounts to be defined up to three levels deep as shown below with the account 'Pastors Car'. Accounts always show up in alphanumeric sequence within their level. Each account belongs to an Account Type. The system breaks down the accounts according to the acceptable accounting standard of - Assets, Liabilities, Revenues, Cost of Sales, Expenditures, Other Revenues, Other Expenditures and Other Financial Sources -Uses. Add a New Account: o Press the 'Add New Account' button. o Select the Account Type (Assets, Liabilities, Revenue, and Expenditures etc.). o The sub-account drop down contains information based on what selections were made from the first three drop down lists. Leave this field set to 'Not a sub-account' if the account being added is a major account. If the account is to be a sub-account of another account, then select its major account from the drop down list. o Press the 'Save' button to add the account to the system. Pressing the

12 12 'Clear' button clears the contents of the window and pressing the 'Close' button returns you to the main COA window. Note on Checkbook types (important): If you need to write checks from an account or reconcile it; although it's a saving, money market, or other type of asset account at the bank, then you will want to enter these as a checkbook type in IconCMO. The checkbook type is the *only* one that allows to write checks and reconcile, as it's treated as a subsidiary ledger. If it is made as a saving account and later you realize you need to write checks - you will not have this ability and you can't transfer the information from one account to another. 1.7 Entering Vendors Go to AP - AP Activities - Vendor List screen to enter your vendors. Once vendors are entered, they can be used in the Accounts Payable (AP), Credit Cards, Check Writing and in some cases Journal Entries. These modules share the same vendor list and consolidates the vendor activity (AP - AP Activities - Vendor Activity screen) on one screen, no matter where the transaction happened so users can review vendor activity in one place. To enter a vendor you simply fill in their name, address, and other information and click save. This information can be modified at any time. Note (Important): Churches may have to track 1099 information for vendors please refer to your CPA on the guidelines for this. If 1099s are needed, please ensure the 'Track 1099' option is set to 'Yes' and click the 'Save' button. The user can choose a 'Default Expense' for the vendor, if they use the same expense each time, speeding up the input when writing checks.

13 Introduction 1.8 Entering Uncleared Transactions Entering AP or Checks 13 Go to AP - AP Activities - Enter Bills. o Only use AP if your organization uses Accrual based accounting. Otherwise put uncleared items in the checkbook, which has a similar process to AP, but is found at the Banking - Checkbooks - Check Writing screen. If you are unsure which method to use (Accrual or Cash Basis), you should review the church's bylaws or review the following website for a detailed explanation. o In either case, you should be using the date of Dec 31st if your fiscal year is Jan - Dec, or June 30th if you are a July to June fiscal year. Remember we are reserving the one day before the system starts to enter in any uncleared items. Depending on your fiscal year and beginning balance date (when you are starting the system), these dates can change. However, it's important to remember that the invoices should be entered on the day that was reserved for uncleared checks (or other transactions) no matter when the invoice actually came into the organization. For example in an organization that is starting on Jan 1st, 2018, with a beginning balance date of 12/30/2017, but has an unclear transaction dated 12/22/ the church would enter this transaction (either in banking check writing or AP - Enter Bills) with a date of 12/31/2013. The reason is to

14 14 o ensure it's in the system, but one day after the beginning balance date of 12/30/2017. Please adjust depending on your unique situation. Enter invoices that have an outstanding balance as of the end of the beginning balance date. Entering Credit Card Payables Go to Banking - Credit Cards - Credit Card Charges to enter in any credit card charges or credits that have not been paid and need to roll forward to the next year. These should have a date of Dec 31st when the church is starting the system on Jan 1st. Please adjust the date to your unique situation. Use this form to enter credit card charges or credit memos made to a store or vendor. A credit card charge increases the Credit Card Payable (Credit Card) selected while a credit memo reduces the Credit Card Payable account selected. 1.9 Entering Items and Customers Before entering in AR invoices, the church must set up their items and customer they wish to use for the invoice. Items are things like room rental for $100, or Book Supplies for $40. Customers are simply the people that purchase items or services from the church. Below there are three types - Service, Memo, and Product. After choosing the appropriate one, fill in the rest of the fields - Name & Description, Unit of measure, Taxable, Account Type, Account Name and Price. Then click the 'Add' button. o Product and Service items work the same, but exist for you to differentiate between the two. When an item of type 'Memo' is selected, all fields will be blanked out except the item name and the item description. When an invoice is printed, only the description will be printed on the invoice - all other information will not show.

15 Introduction o o Taxable field - Set this field to Yes if the buyer should be taxed when buying this item. The buyer will not be taxed if this is set to Yes, but the customer is marked as tax exempt. When tax is applied it will be calculated based on the tax code assigned to the customer. Consequently, the item tax calculation could be different between two different customers. In AR Reports, there is a report called 'Sales Tax Liability' that will identify taxes collected based on the Sales Tax codes defined. Account Type & Name is set to the account to be credited for this sale. This setting has no significance for items of type Memo. Entering customers is similar to entering vendors in AP, as seen below. Enter the information for the name of the customer, address, and other contact information. There is a notes area where you can keep a log of communication. Additionally, applicable taxes and terms can be set up, that will be applied to the customer. 15

16 Entering AR Invoices Go to AR - AR Activities - Invoices. This section would be used to enter any outstanding receivable invoices. Enter Items sold and Customers using - AR - AR Setup - Items, or Customer List. Only those items that were sold and have not yet been paid for need to be entered at this time. Record unpaid invoices that need to come forward into the new year using the Dec 31st date if you are starting the system on Jan 1st. Please adjust to your unique situation if starting on a different day Entering Beginning Balances Go to the General Ledger - Funds - Fund Maintenance screen. Whatever accounting system you're coming from, there will probably be some balances that exist for each fund that has some activity and you will want to enter those balances into the system. Usually, one will pick the end of an accounting period such as a month, quarter or year to determine what those balances will be. Because this is a fund accounting system, each fund will have a beginning

17 Introduction 17 balance assuming its balance is not zero as of the ending period you choose. o Select a fund from the drop down list. The funds were initially put in when you read the Accounting Funds section of this manual. o Press the button titled 'View-Enter Balances'. Situation A You begin using IconCMO at the beginning of your Fiscal Year. For e.g. Jan 1st 2018, therefore, Dec 31st, 2017 is that last day of your previous fiscal year. 1. In this case there will be no revenue or expenses to enter since these entries always begin a new year at zero. 2. Enter assets and liabilities as of Dec 30th of the fiscal year. Remember, we are keeping the 31st for uncleared items. Situation B You begin using the system in mid year. 1. In this case there will be revenue or expenses. 2. Use the end of month revenue and expense report from your old system to enter ending balances. It should contain the information for the year to date of all revenues and expenses. o Enter assets and liabilities into the edit box column titled 'Balance On Last Day'. See below. Beginning balances cannot be saved until debits equal credits. o For e.g. If you enter $500 under assets and $300 Payroll liabilities, then your net assets (Assets Liabilities = Net Assets) will equal $200. The 'Net Asset' line is right after the last liability account. In this example, it would have the $200 entry. o The beginning balance window is the only form where you will have access to the net asset account for a fund and should not be changed once you move forward with the initial balances - ever. o Press 'Save Beginning Balances' button and press 'OK' to confirm the balance for the appropriate date.

18 First Bank Statement Reconcilation Reconciling the first bank statement. o o o When you get your first bank statement, go to Banking: Checkbooks: Reconcile. Set the 'Beginning Balance' to zero - seen above next to the statement date field. Set the Deposits and Other Credits box equal to the deposits on the bank statement plus the beginning balance on the bank statement - see the white box in the red oval to the left. ( Deposits and Other Credits = statement s deposits + statement's begin balance). Enter the rest of the information as it appears on the bank statement like checks and other debits, being very careful not to count things twice. For example, fees may be included in the debits, however you already put them in to the service charge field. The ending balance field on the top line should match the ending balance on your bank statement. This is

19 Introduction o 19 absolutely essential. Then click the 'Save' button, which moves the statement to the bottom portion of the window and can be selected for reconciliation. When you click the 'Reconcile' button and check off all the reconciliation information, it should match the totals in the second line of numbers. All transactions that have the 'BBal' journal type in this window should be checked off in your first statement. If the reconcile balance remaining is not zero - you are missing either a deposit, or debit in the transactions or the balances entered in the Fund Maintenance window are incorrect. If it's incorrect, the system will not be right going forward as accounting is perpetual. The first statement is critical to have right and for the future statements to have the right ending and beginning balances. An example using the numbers in the screen above the checkbook has a $1,100 beginning balance that was inputted in the Fund Maintenance window, as of 12/30/2017. This should have come from the ending balance bank statement on Dec. 31st The Jan bank statement shows two deposits, $ and $150.00, along with two checks, for $300 and $80. The user entered $380 for the checks as seen in the red oval. They also entered in $1,450 ( $1,100 from the bank statement and $350 for deposits). The ending balance on the bank statement is $1,070 and matches the bank's ending balance from the physical statement. You re all set! Disclaimer: Icon Systems Inc. does not provide professional advice. Icon Systems Inc. is not in the business of providing legal, financial, accounting, tax, health care, real estate or other professional services or advice. Consult the services of a competent professional when you need this type of assistance.