Setting Up Your Church’s Chart Of Accounts
Our goal for this course is to provide you with the backbone techniques and principles to start tracking your church’s financials while keeping them as actionable and succinct as possible. Sign up here and we will send you the entire course through email. To start, we’re going to dive into how to set up your church chart of accounts for accurate fund accounting.
Want the skim-able version? Keep reading…
What Is A Chart Of Accounts?
The chart of accounts for your organization is really just the “list” of your accounts. Chart just makes it sound fancy. Furthermore, this list is created by your organization to meet its unique needs.
To this end, accounts represent those five areas of your organization that you’re tracking:
- Asset = what you own = 1000 range
- Liability = what you owe = 2000 range
- Equity = overall worth = 3000 range
- Income = money you get = 4000 range
- Expense = money you spend = 5000 range
So if you would like some more explanation of what should be included in each type of account, check out this expanded lesson on the chart of accounts.
Pro Tip: Create accounts only for what you need – If you don’t have any debt, don’t worry about creating liability accounts. Likewise, if you don’t own anything outside of the money in the bank, don’t worry about fixed assets. You can always add more later as your organization grows and changes.
What Makes It Specific To A Church?
This is where fund accounting emerges. So let’s take a look at some examples of funds.
Equity accounts reflect the value of your assets, minus your liabilities. A fund is a breakdown of your equity. In other words, the money you have, minus the money you owe, is your worth. Furthermore, the money you have and owe can be intended for a specific purpose (fund), therefore you will need an equity balance to represent the fund’s overall worth. So if you know what funds need to be created, you can set each up as its own equity account. Equity is numbered in the 3000 range:
- 3000 – General Fund
- 3100 – Missions Fund
- 3200 – Building Fund
- 3300 – Special Projects Fund
Each of the above examples will have its own balance and value across your entire organization.
So take a look at this, which is a sample church chart of accounts and compare it to yours. Do you have equity accounts for each of your funds? And do you have a lot of accounts you aren’t using any more? Have some complex challenges you are trying to track? If so, check out this in-depth webinar on how to resolve common challenges in your church chart of accounts.
Pro Tip: Don’t be afraid to make changes – Your church chart of accounts is unique to your organization, so don’t be afraid to make it exactly what you need. And think through what you want to see in your reports and try to keep it detailed enough to give you the information you want, but not so complicated that it’s impossible to use.
Want to see more? Sign up and we will send you the entire course through email. We’ll delve deeper into the subject! We’ll talk on church financial reporting, what to manage in your accounting on a day to day basis, and so much more!
Interested in how accounting software built specifically for churches might compare to Quickbooks? Read more on it here.