Hi Carol,How are scholarships recorded in our homeschool co-op’s bookkeeping? We charge an amount for classes but would like to provide a scholarship and return the full amount of tuition or provide a partial scholarship back to the family. For example, we collect the full tuition payment due but then write a check with a certain scholarship amount back to that same family. Is that considered simply as an expense?
Thank you so much!
Sharon
Sharon,
What you call a scholarship is really a tuition discount.
The best way to handle this is to give the discount BEFORE the family pays anything. Then the payment is recorded as income (although smaller income than originally budgeted).
If instead you wish to return some of the tuition a family pays, then you record it as a reduction income. We accountants call it a “contra-income” account. Sort of a negative income account. It’s not an expense; it’s a reduction in income.
Something like this:
Income
Tuition Payments: $5,000
Tuition reduction to needy family: ($500) numbers in parentheses are subtraction or negative numbers
Total Tuition Collected: $4,500
So, it’s not recorded as an expense, even if you write a check. It’s recorded as a contra-income (or a reduction in income) transaction.
I cover this topic and many more in my book, Money Management in a Homeschool Organization. You might find it helpful.
Carol Topp, CPA
