accounting needs.  For example, for-profit-oriented systems often make

problematic assumptions about the workflow of accounting tasks (often because

NPOs rely primarily on donations, rather than fee-for-service or

widget-selling income).  Also, non-profit income is categorized differently

than for-profit income, and the reporting requirements vary wildly from their

for-profit equivalents.

This project is designed to provide some basic templates, tutorials, workflow

documentation and scripts to handle accounting for an NPO.  The primary

example is a

[direct project (aka Model A) fiscal sponsor NPO](https://en.wikipedia.org/wiki/Fiscal_sponsorship#Models_of_fiscal_sponsorship).

This tutorial was written primarily based on

[Software Freedom Conservancy](https://sfconservancy.org/)'s use of Ledger CLI

from 2008-10-22 to present for its own accounting needs.  While Conservancy

has done well using this system, and believes that its account system meets

Generally accepted accounting principles (GAAP), this document **does not**

constitute advice from a CPA nor legal advice for a non-profit that seeks to

comply with relevant state and/or federal accounting requirements for USA

non-profits.  The authors make no representations nor warranties regarding

this information and this information is provided for discussion purposes

only.  Readers of these tutorial and templates are urged to seek professional

advice from a CPA and/or tax legal counsel in constructing an accounting

system appropriate for your organization.

Furthermore, given the authors' limited knowledge of accounting requirements

outside the USA, the suggestions herein probably are not particularly useful

at all for organizations outside the USA.

Configuration of Chart of Accounts

----------------------------------

The first thing any accountant will ask to see is your so-called "chart of

accounts".  The first time I heard this phrase, I thought it was something

complicated.  Fact of the matter is, it's really just a list of all the

accounts that you use.  Accountants also use "account codes", which, as near

as I can tell, are of primary interest because they get better sorting.

Ledger CLI doesn't really support account codes, so I've ignored them.

The real place that Ledger CLI stores your chart of accounts is if you use

the `account` directive along with the `--pedantic` CLI option.  This will

ensure that only accounts you declared explicitly will used.

### Asset Accounts

Asset accounts represent anything that's owned.  Typically, these are

primarily your cash accounts, or anything that's completely liquid.

Many accounting tutorial materials will note that loans, accounts receivable

and other receivables are assets as well.  Most accountants will

say that they are, but with regard to accounts called "Assets", this system

uses the account hierarchy `Assets:` only for tangible, liquid,

cash and/or cash-equivalent assets.  You'll find that account hierarchy

commonly in the examples herein.

### Liabilities Accounts

Similar to assets, most accountants will point out that any amount owed to

someone else is a liability, and that is of course accurate.  Like with the

`Assets:` hierarchy, this system uses `Liabilities:` hierarchy only to refer

to formalized accounts, such as credit cards, where a monthly statement is

sent and have an ongoing liability relationship with the organization.

### Accrued Accounts

For items that are receivable or payable, this system uses `Accrued:`

hierarchy.  Under this top-level account, you'll find accounts payable,

accounts receivable, loans payable and loans receivable.

### Expense Accounts

These accounts contain any expense of the organization, and all begin with

`Expenses:`.

### Income Accounts

These accounts contain any income of the organization, and all begin with

`Income:`.

### Unearned Income Accounts

`Unearned Income:` accounts are used to refer to revenue that is currently

received for services which have not yet been delivered.  The most typical

and common place an NPO encounters this type of income is for conference

registrations.  Since conference registrations arrive in advance of the

conference, it is not proper under accrual accounting to call it income until

such time as the conference successfully completes.

### Reporting The Chart of Accounts

The

[`general-ledger-report.plx` script in the `non-profit-audit-reports` Ledger CLI contrib directory](https://github.com/ledger/ledger/blob/next/contrib/non-profit-audit-reports/general-ledger-report.plx)

will generate a file called `chart-of-accounts.csv`, which is the chart of accounts.

The main command-line program though, that generates the chart of accounts

looks like this:

    $ ledger -f accounts/main/books.ledger -V -F "%-150A\n" -w -s -b 2012/01/01 -e 2013/01/01 reg

Note that this is bound by date.  Typically, it makes sense to list your

chart of accounts for a specific period (e.g., your fiscal year), since your

accounts might have some cruft in them from previous years that should now be

ignored.  (For example, if your organization simplified its chart of accounts

in later years, you don't want to report those old accounts that are no

longer used.)

Handling Fiscal Sponsorship

---------------------------

NPOs that do not provide fiscal sponsorship services will find this section

somewhat useless.  One of the biggest benefits of Ledger CLI is its

incredible flexibility that just does not exist in other accounting systems.

This section describes how to exploit that flexibility to provide a

separation in your books and reporting to handle earmarked accounts for

fiscally sponsored projects.

NPOs that don't need this feature can, in most cases, use the methods

described herein to deploy Ledger CLI, but should leave out the `:General:`

and `:ProjectNAME:` parts of the account hierarchy, since these are the

primary mechanisms used herein to handle the fiscal sponsorship structure.

### Earmarked Accounts

Many fiscal sponsor NPOs keep earmarked accounts for their member/affiliated

projects.  Furthermore, these projects often may either (a) terminate their

agreement with the NPO, and thus deserve a copy of their books that they can

"take away" with them, or (b) might be affiliated with *other* NPOs that also

hold accounts.  This system of earmarked accounts is designed to make it easy

for projects to have a copy of their own accounts, but not interfere with nor

even be aware of (a) the books of other member/affiliated projects, and (b)

the overall books of the entire NPO.

On the latter point, this system utilizes a directory structure and separate

`.ledger` files to separate out the different projects into different

structures.  This allows member/affiliated projects to take their data and

run `ledger` commands against it, separately and without access to the other

`.ledger` files of the NPO.

Proper Documentation For All Transactions

-----------------------------------------

Ledger CLI offers a flexible structure of tagging any entry, including

separate tags for parts of a split transaction.  This system uses those tags

to ensure proper documentation is included for each financial transaction

that occurs for the organization.

Note that since Ledger CLI is a complete double-entry accounting system, each

transaction can correspond to multiple entries in the general ledger.  The

data entry format of Ledger CLI lists each double-entry accounting

transaction in a text file.

Documentation may in fact differ for entries within the transaction.  Ledger

CLI's tagging structure is flexible in this regard: each portion of a

double-entry transaction can carry the same tag or a different tag.  For

example, in this entry:

    2012-05-03 Sir Moneybags

            ;Entity: Sir-Moneybags

            ;Invoice: accounts/documentation/org/invoices/2012-05-30_moneybags-invoice_as-sent.txt

        Accrued:Accounts Receivable:Conservancy  $100,000.00

        Income:Main Org:Donations               $-100,000.00

            ;IncomeType: Donations

The portion of the transaction that credits the `Income:Main Org:Donations`

has three tags: [`Entity`](#entity-tag), [`Invoice`](#invoice-tag) and

[`IncomeType`](#income-type).  The `Entity` and `Invoice` tags, since they're

listed at the top of the transaction, propagate through and apply to both

sides.  But, the `IncomeType` tag, which has no meaning for `Accrued:`

accounts, so it is applied only to the `Income:Main Org:Donations` part of

the transaction.

Below you'll find detailed descriptions of all the possible tags that are

used in this system.  The actual declarations and enforcement of rules of

these tags can be found in the file `accounts/config/config-tags.ledger` in

this project.

### Documentation Tags

Documentation tags are tags that link to other backup documents that provide

evidence and details that justify a particular ledger entry.  The value of

the tag is a relative path name of a file elsewhere in the same repository

that documents the specific expense.  For example, an entry like this:

     2012-02-05 Office Supply Galore - Online Order

         Expenses:Main Org:Office Supplies     $35.00

             ;Receipt: accounts/documentation/org/receipts/2012-02-05_office-supply-galore.txt

         Liabilities:Credit Card:Visa         -$35.00

shows that a purchase was made at Office Supply Galore's online store for

$35.00, and the file

`accounts/documentation/org/receipts/2012-02-05_office-supply-galore.txt`