For a non-profit organisation (NPO), recording a payment is only the beginning. It also needs to know which fund the money belongs to, which project it supports and, when relevant, who provided it. Banana Accounting+ lets you add these details to the same transaction without creating a separate set of ordinary accounts for every fund, project or donor.

This helps an NPO organise the information needed for INPAS fund accounting, the analysis of expenses and fundraising cost disclosures. The software helps collect and analyse information; it does not, by itself, certify an INPAS-compliant financial report.

Segments: a financial view of each fund

Segments divide ordinary accounting transactions into separate reporting dimensions. In the INPAS templates, first-level segments such as ":Fund A", ":Fund B" and ":Fund C" identify funds. They are defined in the Accounts table and are added after an ordinary account code in the Transactions table.

Unlike cost centres, segments can be used to analyse the whole accounting structure: assets (what the NPO owns), liabilities (what it owes), income and expenses. When transactions and opening balances have been attributed consistently, Banana can produce accounting reports and balance sheets subdivided by segment. This is particularly useful for identifying resources and obligations belonging to individual funds.

Where can a segment be entered in double-entry accounting?

A segment may be assigned to the Debit account, the Credit account, or both:

Credit only: 

Debit: "Bank"

Credit: "Grants restricted Project 1:Fund A".

The grant income is assigned to Fund A, but the bank asset is not.

Debit only: 

Debit: "Bank:Fund A"

Credit: "Grants restricted Project 1".

The bank asset is assigned to Fund A, but the grant income is not.

Both sides:

Debit: "Bank:Fund A"

Credit: "Grants restricted Project 1:Fund A".

Both the asset and the income are assigned to Fund A.

This is generally the more useful approach when a complete financial report by fund is needed.

Important: if the same segment is entered on both sides, its individual segment card can show a zero balance because debit and credit offset one another. This does not mean the fund has no money or no income. Use the report subdivided by segment to examine assets, liabilities, income and expenses separately. A segment used on only one side gives a partial view, not a complete fund balance sheet.

Segments in Income & Expense accounting

In the Transactions table, the segment can be appended to either of these columns:

Account only: 

• Account: "Bank:Fund A"
• Category: "Grants restricted Project 1".

This attributes the bank movement to Fund A.

Category only:

• Account: "Bank"
• Category: "Grants restricted Project 1:Fund A".

This attributes the grant income to Fund A. It is the approach used for ordinary income and expense examples in the INPAS Income & Expense template.

If the segment is added to both Account and Category, the movement can appear twice in the segment card. For this reason, the segment-card total must not be mistaken for the fund balance. In more complex accrual adjustments, the NPO must check the individual account/category positions and reconcile the fund separately. In an Income & Expense transaction, Category can also contain a balance-sheet account, for example when recording a grant advance as a liability.

Cost and profit centres: detailed analysis of projects, activities and donors

Cost and profit centres are independent analytical classifications. Banana has three independent columns, CC1, CC2 and CC3, each of which can contain any number of centres:

• CC1: codes defined with a leading dot, such as ".Campaign 1".
• CC2: codes defined with a leading comma, such as ",Project 1".
• CC3: codes defined with a leading semicolon, such as ";Benjamin Foster".

In the Transactions table, enter the code without its leading dot, comma or semicolon. The INPAS templates use CC2 for projects and CC3 for donors. CC1 remains available for another analytical purpose, such as an event or campaign.

Using positive and negative entries

A centre can receive a positive (debit) or negative (credit) movement independently of the ordinary accounts:

• Enter "Project 1" in CC2 to add the transaction amount to that centre.
• Enter "-Project 1" in CC2 to subtract the amount from that centre.

For example, if you decide that a project centre should show income minus expenses:

• A grant of EUR 1,000: CC2: "Project 1" adds EUR 1,000.
• A project expense of EUR 300: "CC2: -Project 1" subtracts EUR 300.

The analytical centre then shows EUR 700.

You can use the opposite convention if you want to monitor net costs instead. The sign is not automatically determined by whether the ordinary transaction is income or an expense. Apply a consistent convention. In Income & Expense accounting, an optional setting can make cost-centre signs follow categories; enable it only when that matches the intended analysis. A donor centre can similarly record receipts and, with the opposite sign, refunds or corrections.

A cost/profit-centre card is not a complete balance sheet or an automatically generated statutory Income Statement. It shows the movements you assigned to that centre. If you use it exclusively for income and expenses with consistent signs, it gives a useful project-level income-and-expense analysis. If you also assign advances or balance-sheet transfers, the total will not represent the project's operating surplus.

Supporting INPAS expense and fundraising disclosures

Ordinary expense accounts support the required analysis in the Statement of Income and Expenses, while cost/profit centres give an additional operational breakdown. For example, a centre for a fundraising campaign can collect the costs associated with that activity, and a project centre can collect the project's income and expenses. INPAS requires an appropriate expense analysis in the Income Statement; an internal cost-centre card does not replace it.

Under INPAS, fundraising costs may need to be reported by donation and grant fundraising, commercial/trading activities and investment management, including relevant direct, shared and support costs. Banana's accounts and analytical centres help identify the underlying entries, but allocation methods and the required gross disclosures must still be prepared and documented.

One transaction, three dimensions of information

Suppose Benjamin Foster donates EUR 1,000 for Project 1 within restricted Fund A. In a single double-entry transaction you can record:

• Debit account: Bank:Fund A
• Credit account: Grants restricted Project 1:Fund A
• Amount: 1000.00
• CC2 (project): Project 1
• CC3 (donor): Benjamin Foster
• CC1 (optional campaign): an appropriate campaign code, if configured

One transaction updates the ordinary accounts, identifies the fund, links the receipt to the project and associates it with the donor. These dimensions are independent: a project can use more than one fund, and a fund can finance more than one project. The NPO can add detail without multiplying its ordinary ledger accounts.

How to view the results

• Cost/profit-centre card: from Reports > Account/Category cards, select Cost centres to view the movements and analytical balance of a centre. The grouped totals are also visible in the appropriate Accounts or Categories section.
• Segment card: open the segment's account card to inspect the entries carrying that segment. Remember that its net movement may be zero or may include duplicated amounts, depending on how the transaction was classified.
• Report by segment: use Reports > Accounting Report or Enhanced Balance Sheet by Groups, then activate Subdivision by Segment. This is the appropriate way to examine the related assets, liabilities, income and expenses separately.

What Banana helps achieve under INPAS

Using these functions, an NPO can maintain detailed fund and project records, analyse the costs of activities, identify donors and prepare supporting information for the required fund disclosures. Fund-level opening and closing balances, transfers, results and the applicable explanatory notes must still be reconciled. INPAS also requires comparative information, prescribed financial statements and other disclosures; no segment or cost centre automatically produces full INPAS compliance.

A restricted fund contains resources that must be used for a specified purpose under the relevant INPAS criteria. A fund is not necessarily a separate bank account, and it is not the same thing as a project or a donor. With Banana Accounting+, you can use segments to identify funds, cost centres to monitor projects and donor centres to track individual contributors, all within the same accounting entries.

This guide uses illustrative examples from the INPAS Banana templates. The amounts are in EUR, and opening balances are assumed to be zero.

First, distinguish a restriction from a delivery obligation

Two donations may both be earmarked for a purpose, but they do not necessarily have the same accounting treatment:

• Restricted donation without a delivery obligation: a donor gives money for a particular purpose, without imposing a qualifying delivery obligation. When the NPO controls the money or has a right to receive it, the donation is generally recognised as income, attributed to the appropriate restricted fund.
• Grant with a delivery obligation: a funding agreement requires the NPO to complete an identifiable, enforceable activity or deliverable. If the money is received before that obligation is fulfilled, the amount is initially recorded as a liability, not grant income. Revenue is recognised when, or as, the obligation is fulfilled.

A restriction on how money may be spent does not automatically create a delivery obligation. The terms of the agreement must be assessed before choosing the entry.

Receive a restricted donation of EUR 1,000 (Fund A)

Benjamin Foster gives EUR 1,000 for Project 1. There is a restriction on the use of the money but no delivery obligation.

Double-entry accounting

• Date: 2024-01-15
• Description: Fund A restricted donation without delivery obligations
• Debit account: Bank:Fund A
• Credit account: Grants restricted Project 1:Fund A
• Amount: 1000.00
• CC2: Project 1
• CC3: Benjamin Foster

Income & Expense accounting

• Date: 2024-01-15
• Description: Fund A restricted donation without delivery obligations
• Income: 1000.00
• Expenses: leave empty
• Account: Bank
• Category: Grants restricted Project 1:Fund A
• CC2: Project 1
• CC3: Benjamin Foster

Result: EUR 1,000 is received in the bank and recognised as income attributable to Fund A.

Pay EUR 300 for Project 1 (Fund A)

The NPO pays for materials or services used by Project 1.

Double-entry accounting

• Date: 2024-01-22
• Description: Fund A project expense paid by bank
• Debit account: Expenses Project 1:Fund A
• Credit account: Bank:Fund A
• Amount: 300.00
• CC2: -Project 1
• CC3: leave empty

Income & Expense accounting

• Date: 2024-01-22
• Description: Fund A project expense paid by bank
• Income: leave empty
• Expenses: 300.00
• Account: Bank
• Category: Expenses Project 1:Fund A
• CC2: -Project 1
• CC3: leave empty

Result: Fund A has EUR 1,000 of recognised income and EUR 300 of expenses, giving an EUR 700 surplus for these activities. The positive/negative CC2 signs in these examples are chosen so that the Project 1 analytical centre also shows EUR 700. Other sign conventions are possible if applied consistently.

If an existing sample file still uses CC2: Project 1 on this expense, change it to CC2: -Project 1 to obtain the analytical result illustrated here.

Receive an advance of EUR 800 with a delivery obligation (Fund B)

Olivia Reynolds provides EUR 800 in advance under an agreement requiring the NPO to carry out specified, enforceable training activities. None of the activities has yet been completed.

Double-entry accounting

• Date: 2024-02-05
• Description: Fund B advance subject to enforceable delivery obligation
• Debit account: Bank:Fund B
• Credit account: Grant oblig. liability:Fund B
• Amount: 800.00
• CC2: leave empty, if CC2 is used to calculate project income minus expenses
• CC3: Olivia Reynolds (optional, to track funding received)

Income & Expense accounting

• Date: 2024-02-05
• Description: Fund B advance subject to enforceable delivery obligation
• Income: 800.00
• Expenses: leave empty
• Account: Bank
• Category: Grant oblig. liability:Fund B
• CC2: leave empty, if CC2 is used for the project's operating result
• CC3: Olivia Reynolds (optional)

In the Income & Expense model, Grant oblig. liability is a balance-sheet account defined in the Accounts table, even though it is entered in the Category column of this particular transaction. The Income column describes a cash inflow; it does not make the EUR 800 a revenue item in the Income Statement.

Result: bank assets increase by EUR 800, and a liability of EUR 800 is recognised. The advance does not increase the fund's net assets or the NPO's reported income at this stage. An individual donor centre may still show the cash received, which is different from recognised income.

Recognise EUR 400 after fulfilling part of Fund B's obligation

Suppose the agreement allows the NPO to recognise half the grant after completing half of the required activities. The recognition must follow the agreed and supportable measure of progress.

Double-entry accounting

• Date: 2024-03-15
• Description: Fund B grant revenue - delivery obligation partly fulfilled
• Debit account: Grant oblig. liability:Fund B
• Credit account: Grants restricted Project 2:Fund B
• Amount: 400.00
• CC2: Project 2 (if income is recorded as positive in the project analysis)
• CC3: leave empty

Income & Expense accounting

This is a non-cash accrual adjustment, not a new bank receipt. The liability must be reduced and grant revenue recognised using the relevant balance-sheet account and income category. This can require an adjustment involving Grant oblig. liability and Grants restricted Project 2, with fund-specific attribution and subsequent reconciliation. Test the entry and the related segment report in a copy of the Income & Expense file: attributing the same segment to both sides can duplicate the amount in the segment card. Do not book another EUR 400 receipt into Bank.

Result: Fund B has EUR 400 of recognised grant income and EUR 400 of grant liability still outstanding, assuming no further transactions. No cash has moved when the liability is released.

How to interpret the example totals

Before Example 4, the combined results of Examples 1-3 are:

• Bank: EUR 1,500 (EUR 1,000 received - EUR 300 paid + EUR 800 received).
• Outstanding delivery obligation liability: EUR 800.
• Recognised income: EUR 1,000.
• Expenses: EUR 300.
• Total net assets generated by these entries: EUR 700, attributable to Fund A.

After Example 4, the bank is still EUR 1,500. The liability falls to EUR 400, and recognised income increases by EUR 400. Subject to the agreement and other adjustments, the net assets arising from these transactions are EUR 700 for Fund A plus EUR 400 for Fund B.

Fund transfers, opening balances and reporting

• No fictitious bank payments: moving an amount from unrestricted to restricted net assets is not automatically a movement of cash. Do not record a bank payment just to create a fund balance.
• Transfers must be permitted: INPAS allows transfers between funds only where legally permitted. Describe and reconcile them in the fund movement disclosures.
• General Fund: all NPOs have a general fund. A dedicated :GEN segment is optional as a Banana setup choice, provided unassigned movements can still be identified and reconciled correctly.
• Opening balances: opening balances assigned to individual segments may require dedicated segment opening entries or the appropriate carry-forward procedure in Banana.
• Fund reconciliation: for each relevant fund, explain its purpose and reconcile the opening balance, recognised income, expenses, other changes, permitted transfers and closing balance. Do not treat a segment card's total as the net assets of that fund.

INPAS reporting reminder

Fund accounting is covered by INPAS, while revenue from grants and donations with or without delivery obligations is covered by INPAS. Banana provides detailed ledger and reporting tools to prepare this information, but the NPO remains responsible for assessing its grant agreements, allocating transactions correctly, preparing the required statements and completing the explanatory notes.