Revenue (or income) is all money coming into your organization, including contributions, pledges, grants, and revenue. You should separate contributions by source (individual, federated funds, corporate gifts, government grants). And also, create separate accounts for program service fees, in-kind, special event revenue, and other miscellaneous income. You need to track income and expenses, pay your pastors and staff, and ensure that you’re church chart of accounts funding the right areas for ongoing health and growth. Tracking and reporting the finances of the church is required for multiple audiences, from your church finance committee to the IRS to the members of your church.

Enhanced transparency

For example, if the church launches a new ministry or program, new accounts may be necessary. Unless you are a brand new church, you will have opening balances that you need to import into your new chart of accounts. If it is a brand new year, you will only import your Assets, Liabilities, and Equity. If it is partway through the year, you will need to bring in all the revenue and expenses for the current year. Before finalizing the chart of accounts, review it to ensure it aligns with your church-specific needs. Consider whether the structure will adequately support future growth or changes.

• This is why when a mistake is made, it takes more effort and time to fix it.
• This is a balance sheet, and should outline your assets, liabilities, and net assets, helping you review and improve your nonprofit’s financial health.
• Every Chart of Accounts is different, but they will all follow this basic structure.
• Your church’s chart of accounts is really just a glorified list of every classification of incoming and outgoing money.

Nonprofit accounting software for managing your chart of accounts

• If you’re still confused, we go into great detail about this verbiage switcheroo in this blog post.
• Liabilities are used extensively when an organization is using accrual based accounting.
• Church accounting software is an essential tool for managing the finances of a religious organization.
• These categories are based on the Unified Chart of Accounts (UCOA), a nonprofit-specific, standardized sample chart of accounts.
• I have found the best way to go about this is to work alongside our amazing church finance committee.

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. To develop an ideal structure of cost centers, review your strategic plan (if one exists), organizational chart, and previous budgets. If a formal organizational chart doesn’t exist, map one out quickly What is bookkeeping by hand. Have a brief discussion with senior and executive pastors about how they see the vision, plans, and org chart changing over the next three to five years.

Review regularly

Unlike other nonprofits, most churches don’t have to file an annual tax return via IRS Form 990. However, there are exceptions to this rule, as well as special forms your church may have to complete depending on its income or the state it operates in. 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.

The Modern Nonprofit Chart of Accounts

For example, each financial account can contain multiple sub-accounts within it. These contain the many different transactions that took place in relation to their financial contents. Accounting for Churches You don’t want to have too many accounts…but you don’t want to have too few either! Use sub-accounts whenever possible to group related expenses together for easy access and review. Kristine Ensor is a freelance writer with over a decade of experience working with local and international nonprofits. As a nonprofit professional she has specialized in fundraising, marketing, event planning, volunteer management, and board development.

From a faith-based focus to a forward-thinking utility, our software solutions make accounting activities like maintaining a chart of accounts simple and easy. To top it off, we back up our software with professional support and even financial consultations if you need them. This is the same concept as what a chart of accounts does for a business. It brings everything together into a single, master bird’s-eye view of an organization’s financial inner workings. Each revenue stream revolves around voluntary contributions from their congregation and supporters. Sometimes, these sources have specific conditions, requiring the funds to be used for certain activities.