Here is what Categories and Funds are and how transactions are allocated to them:
- Categories are the purpose of transactions and are of two types: Income and Expense Categories. Each Category has its balance (the total amount of money allocated to it) and set of transactions. For example, if you rent a property and this incurs both income and expenses, you can have two categories: “Rental Income” and “Rental Expense”.
- Funds are wider, virtual containers where money is stored for specific purposes. Each fund has its own balance (the total amount of money allocated to it), and its own set of transactions. For instance, a church might have separate funds for different departments or projects. In the example above, you might have a “Property Fund”.
- Transaction Allocation: When you record a transaction, you assign it to a specific category within the appropriate fund. This allows for clearer financial reporting and analysis, as you can see where money is coming from and where it's being spent within each fund.