Inter-fund receivables and payables are transactions that occur between different funds within the same organization. In nonprofit accounting, organizations often have multiple funds to track different sources of revenue and expenses.
Inter-fund receivables occur when one fund owes money to another fund within the organization. For example, if the fundraising fund pays for expenses on behalf of the scholarship fund, an inter-fund receivable is created.
Inter-fund payables occur when one fund is owed money by another fund within the organization. For example, if the scholarship fund pays for expenses on behalf of the fundraising fund, an inter-fund payable is created.
It is important to track inter-fund receivables and payables to ensure accurate financial reporting and to maintain accountability for each fund within the organization. Organizations can use journal entries to record inter-fund transactions and reconcile the balances regularly to ensure accuracy.
Example of Inter-fund Receivables and Payables
let’s say a nonprofit organization has two funds: the General Fund and the Program Fund. During the year, the General Fund loans $10,000 to the Program Fund to support its operations. At the end of the year, the Program Fund owes $10,000 to the General Fund.
In this scenario, the General Fund would record an inter-fund receivable of $10,000 on its books, while the Program Fund would record an inter-fund payable of $10,000 on its books. These accounts would be reported on the financial statements of each fund as inter-fund receivables and payables.
Inter-fund receivables and payables can also arise when one fund provides goods or services to another fund, or when a fund reimburses another fund for shared expenses. It’s important for nonprofits to track and report these transactions to ensure accurate financial reporting and to maintain proper fund accounting.
What is the Journal Entry for this Example?
The journal entry for the example of inter-fund receivables and payables would depend on the specific transaction being recorded.
If the General Fund is lending money to the Program Fund, the journal entry for the General Fund would be:
Debit: Inter-fund Receivable – Program Fund
And the journal entry for Fund B would be:
Credit: Inter-fund Payable – General Fund
When the Program Fund repays the loan to the General Fund, the journal entries would be reversed:
Credit: Inter-fund Receivable – Program Fund
Debit: Inter-fund Payable – General Fund
These journal entries reflect the movement of funds between the two funds and the recognition of inter-fund receivables and payables on the balance sheet (Statement of Financial Position) of each fund.