I am using cash accounting. I want to designate a proportion of income for specific future projects. E.g. Income £50, of which £20 is to go towards a specific future event. I tried creating a liability account for that event, and journaling a transfer of £20 to that nominal, but when I look at profit and loss, income is listed just as £30 instead of £50, because of that journal entry. It is not a true picture of income.
How do I create an entry to ringfence some money, a voluntary liability, for something specific, while retaining a true picture of income and expenditure?
I would open bank savings accounts and physically transfer monies to it from the main business bank account. You can mark/describe the transfer with the specific amount you wish. I believe Starling bank has the ability to create these separate pots of money instantly. Income and expenditure then remains correct.
Unfortunately there are three or four projects I am looking to fund, which would require opening multiple bank accounts, which would then become redundant later in the year as the projects were completed.
Could you not just use one savings accounts but label each transfer with the separate projects? Presumably it is funds you want to ring-fence, so in effect a transfer to another bank account is really the only way.
I was really only meaning use the description field to label each transfer rather than using project tags. If there are large numbers of transactions then a spreadsheet would make sense.