Assumption
Activity in the prior year is a good indicator of expected activity in the
current year. It also provides a “budget” figure against which
current status can be measured.
Actual books
In determining last year’s activity, it was necessary to re-key all transactions
for FY2006, balancing each month against the bank accounts to check for accuracy.
Cooked books
To allow prior year comparison, activity in the that year is assumed to
occur in the month income is received, or (the month following) an expense
being incurred. This was not true of FY2006, so the books were “cooked”
by moving expense payment to the month in which the invoice was received.
(The cooked books still balance exactly to the “actual” books, of
course.)
Forecasting
Using last years cooked books we can forecast future income and expenses month
by month. As expenses were moved to the actual invoice month, fluctuations in
expenses will be (fairly) accurately forecast to the month that funds should be
available to pay that expense. In other words, we can forecast income, expense
and the resulting cash flow under optimal conditions (that is, conditions
where we have sufficient funds on-hand to meet obligations in a timely manner).
If we didn’t cook the books, any forecast would reflect a distorted idea of when
expenses were incurred.
Liability
Liability is that part of the Cash in Bank that isn’t really ours. It is not
payables, but represents monies owed in payroll taxes, rental
deposits not yet returned, and grant monies not yet spent (or, conversely, grant
monies spent but not yet received). Liability entries are added to the financial
report so that grants received are not shown as assets of WACO, Inc.
Events
Events are shown as the net proceeds from fund raising or charitable activities.
That is to say, the cost of running, say, a money raffle and associated dinner is
not a true expense to WACO since it is (typically) offset by cash receipts. An event will
generate a profit or loss, but does not effect the costs associated with operation
of the Organization and the Community Center.
Detailed figures of costs and receipts associated with each event are available of
course, since these figures are used for planning purposes.
Net proceeds are what is reported on our annual tax return.
Mike Bishop, May 2007
Ways and Means Committee
Mike Bishop, Treasurer, WACO
Phone:5737 Email: tres@waco-ak.org
Krista Grilliot • Ronnie Widner
