Church Accounting

Thank you for taking the time to review this page. I am pleased to propose an effective solution to your in-church accounting and payroll transitions. We are the leading specialists in Accounting and Payroll services with over 10 years of experience. We pride ourselves in providing our churches with a professional service, guaranteed accuracy and the highest level of confidentiality.

“Show me a denarius. Whose portrait and inscription are on it?” “Caesar’s,” they replied. He said to them, “Then give to Caesar what is Caesar’s, and to God what is God’s.” (Luke 20:24-25).

With the many organizations that comprise the bulk of the non-profit sector, the church is one of them. There are a number of financial reporting differences that continue to exist due to the constitutional concept of “separation of church and state”. The Internal Revenue Service (IRS) offers complete guidance and regulation on non-profit sectors. But religious organizations are generally exempted from all of these requirements. Moreover, churches do not have to apply for tax exempt status, and consequently do not have the necessity to file and income tax return.

But as with all organizations, church administrators and leaders must properly account for the financial condition, results of operations and especially cash flows of the church to the governing board, the assembly and other sympathetic stakeholders. Because even in the absence of government regulations, GAAP (generally accepted accounting principles) should still be strictly adhered to for the assurance that the organization’s funds are handled appropriately. FASB Statement of Accounting Standards (SFAS) No. 116 highlights procedures in lieu to the contributions received and made, while SFAS No. 117 highlights other financial statement guidelines for non-profit organizations that are well-applicable to churches that prepare financial statements and would like an unqualified audit opinion.

If fraud is suspected within the organization, the IRS may step in to conduct an inquiry.

Churches and religious organizations start revenue-generating operations for two reasons. For some, the activity starts as a church and is intended to remain that, but the church generates some vital cash flow. For others, cash flow is critical to the success of the ministry.

The difference between the two types of cash flow is critical to the Internal Revenue Service (IRS). The IRS has been paying closer attention to the church operations of tax-exempt organizations to determine whether each activity is an extension of the mission of the church or a self-supporting church with income that should be taxed.

The church or organization’s performance reflected in the Statement of Activities shows the efficacy of the usage of such contributions. Since churches are in the non-profit generating sector, a significant excess of receipts over expenditures is considered a failure of their performance. This concept should also be highlighted on their budget.

For a church’s well-accounted system, there are several factors that you need to consider:

  • Basic Accounting
    Your church should have the needed knowledge to sustain and maintain all of your accounting challenges – from the most basic accounting principles to sample forms and ledgers, computer tips, filing systems and more. This knowledge is essential to every financial staff member in your church and in deciding which accounting system to use – whether single entry or double entry bookkeeping.
  • Fund Accounting
    Through the use of correct accounting principles coupled with a good fund accounting solution, churches can foresee if not entirely avoid financial crisis. This is the best possible way to track restricted funds for churches and organizations.
  • Church Fund Accounting Guide
    More than anything else, most churches work with three funds, namely general, missions and building funds. Each of these funds has its own assets, debts, income, balance and expense, making its own organization among your bigger scale or organization. By having a proper fund accounting guide, it reflects accountability or stewardship concept in your non-profit organization on your legal responsibilities by seeing certain resources to be used only for a specified purpose or during its specified time periods.
  • Understanding Financial Statements
    In the recent years, several issues of corporate financial accountability become increasingly important, even for churches. As a result, an increasing number of churches provide annual financial reports to their congregations. But many of these reports are more inclined to business financial reporting models, clouding the clarity of a church’s finances. Thus, preparing your financial statements using the Statement of Financial Accounting Standards (SFAS) Numbers 116 and 117 could come in handy for your propositions as it describes the way non-profits should account for contributions and present their financial statements.
  • Benevolence Fund
    Churches extend their benevolence to the needy individuals and families by directly donating funds and gifts. Contributions to benevolence funds may be claimed as charitable deductions if they are not earmarked for particular recipients. When a church of non-profit organization wants to help a particular individual or family with unusually high medical bills or other needed financial assistance, the option of setting up a trust fund at a local bank offers a non-deductible tax purpose. Ministries should consider forming a benevolence committee for the purpose of knowing their benevolence fund’s recipients and the amount they should receive.
  • Setting up a Petty Cash Account
    Some time, you may have some minor cash expenses to buy church supplies, office supplies and any other needed materials. The only individuals that are authorized to spend Petty Cash are staffs or pastors. To prevent you from the complexity in writing small checks or reimbursement system, you only need to set up an account for your petty cash. Always remember that your account for petty cash will appear on your organization’s financial reports as an asset of your church or organization.
  • Church Manual
    Having a written and legitimate accounting policy manual within your church or non-profit will save you from future problems as this will guide you in your succeeding fund operations. From big to small churches, it is highly advisable to keep and maintain their own accounting policies and procedure manual – and even so when your church’s account needs expand.
  • Church Accounting Helpful Resources
    To foster good practices in your church’s or non-profit’s finance, you need to consider a whole range of resources such as information about the treasurer’s role and key tasks, Gift Aid, good practice for handling cash, and methods in producing accounts which will comply with the Charity Commission’s guidance.
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