If your club has been in operation for more than a year or two, it may seem like a daunting task to switch from your current bookkeeping method, over to our accounting system. The following steps describe what we term the Switchover method. While it sacrifices the completeness of entering all of your club transactions, it preserves important tax information for members, and securities held by the club. This is done by entering year-end totals for the members, and basic cost information for the securities.
Before starting, you will want to do the following:
Close out your old books on the switchover date (12/31/yyyy), have all end-of-period reports for the switchover date available, as well as any other records available for information that may not be included in the reports.
Important: Be sure to retain these reports in case there are ever questions about the switchover procedure.
For each security still owned on the switchover date (12/31/yyyy), find:
The name, account number, type of security (stock, mutual fund, federal tax free, etc.) and ticker symbol.
All information about each block of shares of each security owned by the club on the switchover date. This includes buys, stock splits, mergers, and reinvested distributions.
For each member still active on the switchover date, (12/31/yyyy), find:
The name, address and other identification information.
The total investment in the club and total taxable earnings reported for the member over the past years, in other words, the member's tax basis in the club. (Each member's tax basis is equal to the sum of the contributed capital plus all earnings distributed to that member.)
The total number of units owned by each member on the switchover date.
If you do not know the number of units owned, but do know the percent ownership of each member, choose a convenient number for the total units and multiply this number by the percent ownership to get units owned for each member. For example, you choose 1000 units for the total units. One member owns 8% of the club. The number of units for this member would be 1000 x .08 or 80 units.
For each cash account still used by the club on the switchover date (12/31/yyyy), find the balance in the account. You also need to know if the interest received on your Broker account is tax-free.
Once you have this information available, you will want to download and read chapter 5 of the PDF copy of the online accounting manual from our site at:
Chapter 5 details how to set up an account on the myiclub.com, gives steps to help decide if you will enter *all* of your club information, or use the switchover method, and how to make use of the information you have gathered.
Special cases for members who have taken partial withdrawals:
Entering the Beginning Balance transaction for a member who made a partial withdrawal can pose problems for the treasurer. Instructions for the three possible scenarios are given below.
If the value received was less than the amount paid in, decrease the amount in Beginning Balance Investment by the amount of the value received. The Earnings amount will not change.
If the value received was greater than the amount paid in but less than the sum of paid in and earnings, subtract the amount received from the paid in amount, the results will be a negative number, and use the result as the Beginning Balance Investment amount. The Beginning Balance Earnings amount will not change.
Example: John Hancock has paid in $3000. While a member his share of earnings is $1000. He made a partial withdrawal of $3500. In his Beginning balance Investment Amount enter negative 500. (3000 paid in, minus 3500 withdrawn.) The Beginning Balance Earnings Amount should be 1000. The Paid in Plus Earnings for John Hancock now equals 500 (-500 +1000).
If the value received was more than the amount paid in, plus all accumulated earnings, subtract the amount received from the paid in amount, the results will be a negative number, and use the result as the Beginning Balance Investment amount. The Beginning Balance Earnings will be the same number as the Investment amount, but POSITIVE. The sum of Paid in Plus Earnings will now be zero.