How to set up a chart of accounts for your church
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We’re going to dive into how to set up your 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. This list is created by your organization to meet its unique needs; however, here is a sample chart of accounts that you can use if you need a place to start.
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
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. 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. 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. 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.
Your Turn: Take a look at the sample chart of accounts and compare it to yours. Do you have equity accounts for each of your funds? Do you have a lot of accounts you aren’t using any more? Have some complex challenges you are trying to track? Check out this in-depth webinar on how to resolve common challenges in your church’s chart of accounts.
Pro Tip: Don’t be afraid to make changes – Your 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 and try to keep it detailed enough to give you the information you want, but not so complicated that it’s impossible to use.