What Is A Chart Of Accounts?
Learn how to accurately track your nonprofit’s financials. In this lesson we will discuss how to set up your chart of accounts for accurate fund accounting.
The chart of accounts for your organization lists all of your accounts. Chart just makes it sound fancy. You create this list to meet your organization’s unique needs. However, here is a sample nonprofit chart of accounts that you can use if you need a place to start.
Accounts represent five areas of your organization that you need to track:
- 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
For more about 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.
What Makes It Specific To A Nonprofit?
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 to create, 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.
Take a look at the sample chart of accounts above and compare it to yours. Do you have equity accounts for each of your funds?
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. Try to keep it detailed enough to give you the information you want. But don’t make it so complicated that it’s impossible to use.
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If you’re ahead of the curve and want to get started with awesome fund accounting, feel free to learn more about Aplos Accounting.