Chart of Accounts (part 2 of 4)

In part one, I talked in generalities about financial statements. This post is description of each of the major areas.


Balance Sheet (no other name for this doc)

  • Assets
    • Cash on hand in bank and investment accounts
    • Petty cash
    • Sometimes it lists cash you’ll get within the next 12 months
  • Liabilities
    • Payables – usually payroll taxes and payroll deductions which will be sent to the proper recipient the next month. These should never sit for month than a month.
    • Debts – long and short term debts for mortgages and building loans. Each debt should be listed separately so you’ll know what it was for. This must be updated each month as you pay down your debt.
    • Temporarily restricted funds – these are typically restricted by purpose (what they are for). Usually these monies are spent within 12 months for a specific cause such as mission trips, children’s and worship events, etc. Sometimes funds are there for years but each one should have a “sunset clause.” (see my UPMIFA blog post regarding what to do with “old funds”)
    • Permanently restricted funds are restricted by time (how long they are set aside). Usually these are put into an endowment fund because they time and purpose is longer than 12 months.
  • Net Assets (also known as equity, retained equity, or owner’s equity)
    • This is the total cash balance of what the church has accrued since it was started. Often there are two figures for this: the current year-to-date earnings and the prior years’ earnings.


Profit & Loss Statement (also known as an Income Statement and Statement of Revenues & Expenses)

  • Revenues or Receipts
    • This section is the total income for the church. I strongly encourage that this section have only revenues from the main purposes of the church. Include in this category only tithes, offerings, and other undesignated budget gifts.
    • You can have a subsection for other receipts such as interest, building use receipts, etc. but this receipts are incidental revenues.
  • Expenses
    • These are budget expense lines grouped into categories with a similar purpose. Churches have several broad categories and the most common ones are:
      • Worship & Music
      • Care & Fellowship
      • Discipleship & Education
      • Missions & Outreach
      • Office Administration
      • Building & Grounds
      • Personnel


Lead On!