Wednesday, July 9, 2008

How Does USCF Membership Accounting Work?

Here's my quickie version of how this would be done.

Assumptions: Donna pays $80 in May, 2008 for a 2 year membership. To simplify accounting, USCF policy is to count partial month as full month.

Entry in May, 2008.
Debit: Cash $80.00
Credit: Deferred Revenue $80.00
To record receipt of money from Donna A. for 2 years membership dues.

Then each succeeding month for the next 24 months 1/24 of the Donna's money is reclassified from deferred to actual revenue by the following entry.

Debit: Deferred Revenue $3.33
Credit: Membership Revenues $3.33
To recognize revenues earned from Donna A's 2 years membership payment.

So at December 31, 2008 Donna's account will look like this:

Deferred Revenue: $53.36 (80.00 - 26.64)
Membership Rev: 26.64 (8 months x 3.33 per month)
Donna's Total: $80.00 (53.36 + 26.64)

At the end of May, 2009 the USCF closes it's books for the fiscal year end. That means that all the Revenue and Expense accounts are reset back to zero. But the monthly entry stays the same.

Debit: Deferred Revenue $3.33
Credit: Membership Revenues $3.33
To recognize revenues earned from Donna A's 2 years membership payment.

So, for June, 2009, here's what Donna's account will look like:

Deferred Revenue: $36.67 (subtract 13 months x 3.33 per month = 43.33 from 80.00)
Actual Revenue: 3.33
Fund Balance: 40.00 (12 months x 3.33 per month)
Fund Balance is an equity account where the total of the previous years' revenues and expenses are closed to at the end of each year. And yes, since 40 does not divide by 12 evenly, there's going to be some rounding.

In April 2010 all of Donna's membership months will have been used up and her deferred revenue will be all gone. Then she will have to renew her membership.

Note, that for sustaining and life members, the same accounting technique applies. Only changes are the different payments and the different timeframes.

My point here, is that the 3.33 entry does not have to be done by hand each month. Conceptually, this is not that difficult. Mastering any chess opening is way harder than this. This could all be done automatically. We just need the right software.

1 comments:

Anonymous said...

And yet, that doesn't solve the cash flow issues...

::sigh::