I'm doing some volunteer bookkeeping for a small nonprofit. If we have an upcoming event and people pay in advance for a meal, how do I enter that in a general ledger (updating Quickbooks for last couple months)? I assume the payment is a debit to the Events/Food account. But what would be the balancing credit?
From the information presented only, this is what I would do:
debit: checking account (if paid in cash)
credit: liability account related to this event.
Explanation: Current entry: The debit is to record the value of what you received in advance.. if they made an actual payment, that amount increases your cash / checking etc.. If they made only a promise to pay (to reserve their meal), then the debit would be to accounts receivable. The credit is to record the organization's liability for providing that meal to that person. Until the event takes place, and the organization provides that promised item relating to the money received, you have that liability. It is just as substantial as a loan from a bank. Future entry: The day after the event, when everyone has received their meals, you'll record this entry:
Debit: liability account related to this event.
Credit: revenue related to this event.
And after that, the entries are complete: amount received is in checking, and revenue (for benefit provided) is in place.
(If the event were cancelled, you'd likely refund the money and record the opposite of the initial transaction).