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Accounting For Churches

Most people believe that accounting equals April 15th (the tax deadline date). Others who are more experienced with accounting know about auditors and U.S. GAAP. There also exists a certain contingent who just want to do accounting for their church.

Accounting in a Nutshell

Accounting in its basic form was about collecting useful information. Hunters used accounting to effectively hunt and kill animals. An army general used accounting to see how his troops were doing. A banker used accounting to track his funds.

Nowadays accounting is thought of much differently. Instead of a useful tool, it is a burden. That is because so much of accounting is involved with compliance.

Church accountants don’t have to think of accounting as simply compliance. Surely they must comply with certain rules, but they can use church accounting software to track useful information for the church. That useful information could be Sunday School attendance, donations, or number of baptisms.

To better collect information that will aid the church, church accountants use fund accounting. Funds are simply reserves of money set aside for a specific purpose. A common misconception is that a fund is a bank account. A church doesn’t need a separate bank account for each fund.

Why do Most Churches Use Fund Accounting?

Churches are different than normal companies. When you give your money to a church you have some say over where the money will be used (missionary services, humanitarian services, construction, etc.). When you give your money to a Grocery Store, you can’t tell them what to do with it. Churches set up funds to keep track of where you wanted the money to go.

Church Management Software

Once it is understood that church accounting is different than a normal company’s accounting, one can see the need for special software. Church accounting software makes it easy for churches to create funds.