Chart of Accounts for a Church: A Comprehensive Guide

Regularly reporting your church’s finances is important to ensure transparency with your congregation and comply with state and federal regulations. There are several types of reports you could use, but two of the most important are financial statements and donation acknowledgments. This automated church chart of accounts Excel spreadsheet is the best free church accounting template you’ll find online. This spreadsheet has all of the basic accounting functionality that expensive accounting software offers. Church accounting refers to the organization, recording, and planning of a church’s finances.

Benefits of Church Accounting

The Statement of Functional Expenses is a critical financial report for nonprofit organizations that provides a detailed overview of their expenses by function and nature. This statement enhances financial transparency, accountability, and informed decision-making, contributing to the organization’s overall financial management and mission fulfillment. At the end of the day, setting up your church’s chart of accounts shouldn’t be a hassle. You need fund accounting software that can easily create funds in your chart of accounts. It should also track the income, expense, and overall balance of your church’s funds.

Download Our Church Chart of Accounts Template

But with good church accounting software, all of the administrative tasks become clearer, making it easier to produce complete financial statements for auditors. When managing a church ministry, there are numerous expenses that need to be addressed. Unfortunately, most people responsible for overseeing budget information fail to prepare it in the proper format. Without an accounting format budget template, it is easy to mismanage your church accounting and overburden the congregation with heavy monetary demands. Many organizations start out tracking their transactions in a spreadsheet for simplicity.

Operating Budget

Stay up to date on the IRS’s guidelines for church financial reporting to ensure compliance each year. Setting up a Chart of Accounts for a church involves a careful balance. You want the COA to be comprehensive enough to capture all financial activities, but also straightforward enough to be easily understood and used by those responsible for bookkeeping and accounting. Also, it’s essential to get input from people who understand the church’s financial statements, like the treasurer or finance committee, when setting up the COA.

– Use and Maintain Your COA

• Bonding a bookkeeper can provide protection in the event of fraud.
• Your church’s number one priority is likely furthering its mission, and for good reason.
• Ultimately, the organization should carefully consider both options and choose what works for them.
• With a properly designed structure of departments or projects, you can easily identify purpose and provide discrete tracking and measurement.
• If you notice someone regularly completing tasks assigned to another employee, and there are discrepancies in the numbers, look into it.

Departments — youth, media, worship, and the like — are a bit more straightforward, but it’s still important to clarify reporting and accountability structures. However, be sure to regularly review your Chart of Accounts to keep your church’s finances as accurate and up-to-date as possible. You may need to add, delete, or inactivate accounts as your church finances change, but if you have a strong foundation you should be set up for long-term success.

Remember, your church’s chart of accounts is crucial to accurately recording transactions and generating relevant reports. For more information, check out our comparison of QuickBooks® and an accounting platform designed specifically for churches. It is one of the most important things you’ll need to set up to correctly record transactions and contributions, and to generate financial reports. As you go about all of this great work, sometimes financial management ends up taking a backseat. However, effective stewardship of your church’s finances is essential to the success of your mission-related activities, and a solid accounting system makes this possible. Church accounting is a complicated job; it often scares off church workers.

CPE Webinar: Chart Of Accounts Structures For Nonprofits…

• You can spend your time and money more productively online by using a free, professional church accounting budget template format that will help you keep a close watch on where each dollar goes.
• However, the statement can also help with the budgeting process, so you might choose to create one even if it isn’t required.
• Similar to assets, liabilities are listed in the order they are expected to be settled, with current liabilities appearing first.
• If you want to raise X amount of money within the next five years, it might mean more hiring.

Although you’ll create an operating budget from scratch once a year, budgeting shouldn’t be a one-and-done event for your church. Check in with your budget on a monthly basis to help keep your church on track with its spending and revenue generation throughout the year. Learn more https://www.bookstime.com/ about our church reporting tools, budgeting features, and accounting solutions. Because these expenses are discretionary, and the total spending across departments can add up to a substantial amount each month, some kind of tracking of meals and food is absolutely necessary.

Another way to shape an elegant chart of accounts is to use account groupings or roll-up accounts to organize your line items. Quite often, structures in the accounting system were set up years ago, and—based on changes to your mission, strategy, and personnel—may no longer effectively serve the organization. These categories are based on the Unified Chart of Accounts (UCOA), a nonprofit-specific, standardized sample chart of accounts. However, many churches find the UCOA too detailed and are better off using other church-specific templates that they can customize to meet their needs. To get started with church accounting, you’ll need to understand a few notable financial resources and reports. Work with the church accounting specialists at Jitasa to refine your financial management practices.

The Five Pillars of Financial Wisdom: Equipping Your Members for Financial Success

• As 501(C)(3) entities in the US, churches are subject to specific regulatory requirements that differentiate their accounting practices from other organizations.
• Make sure to issue W-2s to each staff member on your church’s payroll and 1099s to any contractors you work with by January 31 of each year to fulfill your tax obligations as an employer.
• It also helps in internal control, ensuring proper checks and balances are in place to prevent errors, fraud, or misappropriation of funds.
• To top it off, we back up our software with professional support and even financial consultations if you need them.
• Create internal policies and controls to significantly improve your fraud protection.

These three areas surface regularly when redesigning a church’s general ledger accounts. However, because local churches often provide meals for multiple unrelated purposes, accounting for food and beverage is often the most complex. The common building blocks of an effective COA are locations, funds, and departments.