Setting up your church chart of accounts correctly is the mandatory first step toward accurate fund accounting. It is the foundation that all other accounting tasks will build upon, and will be required to demonstrate financial stewardship to your congregation.
NOTE: This video references nonprofits, but the same principles and practices apply to churches.
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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 the five financial buckets of your church:
- 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
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.
Church Chart of Accounts Template
Download our free sample church chart of accounts and compare it to yours. You can use it as a starting point. Keep what you need and remove what you don’t.
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. Think through what you want to see in your reports. Try to keep it detailed enough to give you the information you want, but not so complicated that it’s impossible to use.
If you haven’t done so already, sign up for our free 5-Day Church Accounting Email Course where we’ll delve deeper into the subject. We’ll talk about church financial reporting, what to manage in your accounting on a day-to-day basis, and so much more!
