One month, worked in full

The society

The Harbour Lights Players Society is a small theatre society in British Columbia, invented for this example. Its March is a real month worked in full. The society charges GST and PST, because it registered for both. Its year ends December 31.

It has one bank account, a society credit card and two funds: the general fund and a workshop fund that holds grant money given for one purpose. A treasurer keeps its books. Every figure below is the figure the books hold.

Where March starts

The books open on March 1 with $4,000.00 in the bank, all of it the society’s own money in the general fund. Nothing is owed, nothing is owing, and no grant money is being held.

The society’s position is one line: it owns $4,000.00 and it owes nothing. So its net assets — what belongs to the society — stand at $4,000.00. Every figure at the end of the month is built from this line.

A grant is won

On March 3 a community foundation awards the society $6,000.00 for a series of spring workshops. The award is recorded the day it is won, before any money moves. The books show $6,000.00 owed to the society, held in the workshop fund.

The same $6,000.00 stands as grant money held for its purpose — not yet the society’s earnings. On March 5 the money lands in the bank. It settles the award: the bank rises to $10,000.00, nothing is owed any more, and the $6,000.00 still waits in its fund as money held for workshops.

An award is not income. Spending is what earns it.

The first workshop cost

On March 9 the society pays the workshop facilitator $1,200.00, recorded from the workshop fund. The facilitator charges no tax. The bank falls to $8,800.00, with $4,800.00 of it left in the workshop fund.

The same act earns the first slice of the grant: $1,200.00 of the money held moves into grant revenue, because it was spent on the purpose it was given for. Money held for workshops now stands at $4,800.00. Grant revenue for the month stands at $1,200.00.

A member’s claim

On March 12 a member buys printing for the show and pays from their own pocket: $84.00 in all — $75.00 of printing, $3.75 of GST and $5.25 of PST. The member files a claim with the receipt. The treasurer approves it, because no one approves their own claim.

Approval records the cost: $80.25 stands as the cost of printing, which is the $75.00 plus the PST, because PST is never claimed back. The $3.75 of GST stands apart as tax the society can claim back, because the society is registered for GST.

The member is paid back on March 20, and the bank falls to $8,716.00.

Ticket sales

On March 15 the society sells forty tickets at the door at $25.00 each: $1,000.00 of sales. The tickets are sold in British Columbia, so the tax is worked out for British Columbia: GST at 5% is $50.00, and PST at 7% is $70.00.

The buyers pay $1,120.00 in all, and the bank rises to $9,836.00. Only the $1,000.00 is the society’s revenue. The $120.00 of tax is the governments’ money from the moment it is charged, held apart until the returns send it in.

A bill that waits

On March 22 the hall’s bill for the show arrives: $500.00, due April 5. It is recorded the day it arrives, as a cost of the show and as money owed.

Nothing leaves the bank — the bank still stands at $9,836.00 — but the society now owes $500.00, and its statements say so. Recording a bill and paying it are two facts. March holds only the first.

Buying on the card

The society also buys on its credit card, and March holds two card buys. On March 24 it buys paint and set supplies on the card: $200.00 of goods, $10.00 of GST and $14.00 of PST — $224.00 in all.

The buy is recorded the day it happens, from the receipt, the way any spend is recorded. The cost of the paint stands at $214.00 — the goods plus the PST, which is never claimed back. The $10.00 of GST stands apart as tax the society can claim back.

What changes is what the society owes: the card now stands at $224.00 owed. On March 27 it buys props and costume pieces on the card: $100.00 of goods, $5.00 of GST and $7.00 of PST — $112.00 in all, a cost of $107.00 and $5.00 more of GST to claim back.

The card ends the month at $336.00 owed. Buying on the card is owing, not paying: the cost stands when the thing is bought, and the bank is not touched until the card is paid.

The statements arrive

The March bank statement shows five lines: the grant received, the facilitator paid, the ticket money received, the claim paid back and one line the books do not hold — a $5.00 monthly account fee the bank took on March 31.

The treasurer records the fee from the statement line itself, as a bank cost. The treasurer matches the other four lines to the entries standing. The statement closes at $9,831.00. The books now hold the same $9,831.00, to the cent, so the bank’s month is proved: its reconciliation stands finished.

The card statement comes in the same way. It shows two lines, the paint and the props. The treasurer matches each one to the purchase recorded from its receipt. The card statement closes at $336.00 owed. The books hold the same $336.00 owed on the card, to the cent.

The month’s questions

Before the lock, the routine asks its questions about March. Did each spend from the workshop fund fit the giver’s purpose? The facilitator’s fee did.

One category holds more than half of the month’s spending — the facilitator’s $1,200.00 in contractor fees. The routine asks whether unlike things are hiding in it. They are not: the category holds the one fee.

And the entries at the month’s edges — the opening balance on the 1st, the award on the 3rd and the fee on the 31st — belong to March, as recorded.

March, locked

The locked month’s figures are these. The bank holds $9,831.00: $5,031.00 of it general money and $4,800.00 of it workshop money.

The society owes $500.00 on the hall bill, $336.00 on its card, $50.00 of GST and $70.00 of PST held for the governments and $4,800.00 of grant money still held for workshops — $5,756.00 owed in all.

Tax paid that it can claim back stands at $18.75. So what belongs to the society is $9,831.00 plus $18.75, less the $5,756.00 owed: $4,093.75.

The month itself took in $2,200.00 — $1,200.00 of grant revenue earned by spending and $1,000.00 of ticket sales. It spent $2,106.25: the facilitator’s $1,200.00, printing at $80.25, the hall at $500.00, paint at $214.00, props at $107.00 and the bank fee at $5.00.

The difference, $93.75, added to the $4,000.00 the month opened with, is the same $4,093.75. Two roads, one figure: that is what a locked month proves.

Paying the card

April pays the card. On April 10 the society pays the card’s March balance from the bank: $336.00. The bank falls to $9,495.00, and the card stands at nothing owed. The payment is not a new cost. The paint and the props stood as costs in March, when they were bought.

April’s payment only settles what the card was owed. It stands on April’s card statement as a payment line, matched to this same entry when that statement comes in. A card payment counted as a cost would count the same money twice.