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Handling Income Received in Advance (such as Grants)
Handling Income Received in Advance (such as Grants)
Mick Devine avatar
Written by Mick Devine
Updated over a month ago

Many not-for-profit organisations receive grants for particular projects on a regular basis. These grants may be received in advance of the actual period to which they apply, and are recorded in your accounting system by receiving them into a liability account. The grants are then allocated to an income account each month via journal entry.

This help note will describe the Budget set up to handle this for cashflow purposes.

Budget Entries

  1. Enter a monthly Income budget for the grant amount you will journal monthly.
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  2. Enter the same monthly budget for the Grants Received in Advance liability account which is -100% of the income account budget. This will reflect the debit side of the monthly income journal.
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  3. Adjust the budget in the Grants Received in Advance liability account for the grant amounts you expect to receive (excluding GST), in the months you expect to receive them.
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    So your Liability account Budget line will look like this for a $120,000 per year grant, paid in two instalments of $60,000:

    1. To make the Budget clearer, you could add in two sub accounts to show the separate values, which will then automatically sum to the net value of the Grants Received in Advance account:

Cashflow Reporting

There are two options for how this information is presented in your Cashflow reports:

  1. Show the monthly Income and Allocation as cash in, and cash out of the organisation, which balance each other off, and the inflow when bulk payments are budgeted to be received.

    1. You can use a Cashflow Account Tree to group these accounts to Income, which will show the bulk amounts when they are budgeted to be received.

  2. Add an unlinked account for the Allocation in the Balance Sheet, then set the income and Allocation accounts as NON-Cashflow accounts, these accounts will not be displayed on the Cashflow Forecast, and you will only show the receipt of the funds as an inflow in the balance sheet as funds are expected.

    1. You can group the Grants Received in Advance and the Allocation Account under one header in an existing Account Tree for a net Balance Sheet Figure.

Option 1:

  1. In Cashflow Settings: Set the Cashflow Type for the Grants Income account to Profile and 100% in current period
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  2. Set the Cashflow Type for the Grants Received in advance account to Profile and 100% in current period (to match Income account).

  3. For the Cashflow Forecast you could create a Calxa Account Tree with a Summary only, Income header account and allocate both the Income and Liability accounts to the Income header to get a net balance for Cashflow forecasting purposes.
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Option 2:

  1. Add an Unlinked Liability Account: Allocation of Grants, number this account to follow the Grants Received in Advance account in the Chart of Accounts.

  2. In Cashflow Settings: Set the Cashflow Type for both the Grants Income and Allocation of Grants accounts to NONE

  3. Set the Cashflow Type for the Grants Received in advance account to Profile and 100% in current period

  4. In your normal reporting Account Tree, you could add a Summary only Header in the Liability section to combine both the Grants Received in Advance and Allocation of Grants accounts.

    1. This will report your Income monthly as allocated in the P&L reports, and the net balance of your Grants Received in Advance in your Balance Sheet reports.

    2. Cashflow reports will report only the funds as budgeted to be received.

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