Well thank you very much. I've been thinking about it since I wrote my question. The man before me was a retired qualified accountant. I was therefore unwilling to question his methods. But it turns out he had an excellent reason for doing what he did. You might be interested.
What he was doing was this. Donations come all at once - to a mix of funds. So if there was a donation (church collection in this case) of £500 and £100 was for the building fund, he debited the current account with £500 and split the credit into £100 for the building fund and £400 for the general fund. But the £100 went directly to the balance sheet as a liability and only the £400 went to the profit and loss account.
Now that seemed very odd to me - but he referred to the building fund element as deferred income. I wasn't familiar with this term so I found a definition on the internet
Deferred income is where we have been paid by a customer [or received a donation in this case] but haven’t actually earned the income [or done the work] yet. It would occur in a situation where a customer [donor] is paying [donating] in advance for goods [work] that we are going to deliver [do] in the future.
The internet says this is all part of the matching principle. So - by that definition - he is absolutely right.
I still think you are right though because this isn't a competitive company, it's a charity that has to openly display it's restricted funds rather than tuck them away near the bottom of the balance sheet.
So I think you're right - but he had an excellent reason for doing what he did. I'm looking around to see what other charities do but nobody seems to treat it like he did.
Thank you for answering my question. I think we can consider the topic closed unless you want to get back to me.
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