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Bill ledger template for non-profit organizations

Hey, this is Alex from the Aplos Academy today we're gonna take a look at transactions what they are how and when you record them and how they impact your nonprofit accounting system if you've created a non-profit chart of accounts and are ready to record transactions this is the course for you what are transactions in the previous lesson we learned what accounts are and how you set them up to represent the five areas of accounting the money that you have o receive spend and your overall work these accounts are given value by recording transactions which are essentially the happenings within your organization receiving money spending money paying bills and transferring money in between your banks are all examples of transactions that happen on a daily basis for your nonprofit so how do you record transactions using your accounts before we dive into the format I want to tell you about the relationship between the types of accounts once you understand this everything else becomes a lot easier to deal with accounts work together in a system which is called double entry accounting which basically means in every transaction there's gonna be two sides one side is called debit and the other side is called credit so before we move forward forget everything you know about the terms debit and credit it doesn't mean your debit and credit cards and it doesn't even necessarily mean debiting or crediting an account in accounting debit and credit means something completely different than what you've ever learned you're welcome there are five types of accounts and each one is increased or decreased by a debit or credit if you're increasing an asset or an expense account you would use the debit column and for increasing liabilities income and equity you would use the credit column every transaction has a debit and a credit amount and these amounts will always equal each other let's take a look at an example so you can see how this actually plays out so let's say you go to the store and you buy some supplies some paper pens stapler that all amount to about 50 when recording this purchase you're going to use one of your expense accounts since they're used when you record spending money so YouTube the expense account office supplies since expense accounts are increased by debits you're going to put the $50 in the debit column next to the office supplies account so what is the other side of this transaction when we're doing double entry accounting well if you purchase these supplies with money from your checking account your checking balance is being reduced therefore the other side of this transaction would be your asset account checking for the credit amount of $50 again since the expense account is being increased it's going to be on the debit side and since the asset is being decreased it's on the credit side debit is 15 credit is 50 they both equal each other there's your transaction so welcome to recording transactions this process is called double entry bookkeeping and it's a necessary part to any accounting system let's take a look at one more example this time using income so let's say you received a donation for $100 this is money that's being received by your organization therefore it's considered income the income account you're going to use is called contributions and since it's increasing an income account it's going to be in the credit column so again what are the other side of this transaction using double entry accounting well if you're depositing the money into your bank account in other words you're checking that would be the other side of the transaction so since assets are increased by debits you can see that this works out in our transaction so your income is increased by the credit side the assets are increased by the debit side the debits and credits balance each other so as you record transactions for your nonprofit remember the chart that we used a couple of minutes ago remembering this chart is going to be essential if you ever need to figure out the double entry accounting system so how do you record these transactions this is going to happen one of two ways either by hand or through the use of some sort of software obviously software is easier but if you do it by hand you need to understand two things the general journal and the general ledger the general journals where you're going to manually record the transactions like the examples we mentioned earlier you're going to record both accounts that are used and their debit and credit sides and you might also want to record some other information like the date where you purchase something who gave you money or any other details once you have the transaction recorded in the journal you would record the account details in the general ledger the ledger is a further breakdown of your account balances and the sum of your transactions so that's where we're gonna stop for today on the recording transactions by hand by now you're probably going a little cross-eyed the journal and the ledger of both entirely replaced by software which makes the whole process infinitely easier software allows you to record transactions with all the details that you need plus they usually have screens that are a lot easier to use so you don't even have to do double entry accounting you'll record one account that you're using and they'll automatically do the other side of it for you plus it will automatically keep your account balances up to date which will allow you to run reports which we'll cover in the next lesson so as a nonprofit when you look for accounting software make sure that it has these three things fund accounting nonprofit reporting and integrated donations so what's next now that we've learned how to structure a chart of accounts and record transactions it's time to see how everything boils down in what's called generating reports we're going to take a look at the two most commonly generated reports plus the reports that you need as a nonprofit as per the IRS guidelines until next time make sure to read the content below because it's going to go into a lot more detail on what we covered today plus if you're interested in nonprofit accounting software be sure to try Aplos' 15-day free trial to see how simple this whole process can be