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How To Structure Your Church’s Chart of Accounts (+ Sample)

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Nina

When it comes to church accounting, financial reporting documents often look a bit different than they do for businesses and other nonprofits. However, your church still needs to have clear, organized financial reports for both tax purposes and general accountability. The chart of accounts serves as the master list of your church’s transactions, so it is important to have a clear understanding of what this chart is and how it works.

Here is how we are going to break down this explanation into tangible sections:

Let’s go!

No time to read the article? Download your sample Church Chart of Accounts template.

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What Is a Church Chart of Accounts?

A church’s chart of accounts is simply a list of all of its financial transactions. The transactions will fall into one of these five buckets or categories: 

  • Assets

  • Liabilities

  • Equity

  • Income

  • Expenses 

Anyone who is at least somewhat familiar with accounting will know these buckets. That way, any accountant who looks at your church’s chart will know what you are referring to.

sample-church-chart-of-accounts-what-isSimon is ready to become an expert on church charts of accounts!

A chart of accounts is the foundation for your church’s accounting, but it is also a living document. Your church will need to periodically update this chart as new transactions occur and old transactions are no longer relevant. Thus, it needs to be clear, simple, and easy to edit.

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Church Chart of Accounts Sections

Now, let’s dig deeper into each category. Each one will have a name and a number associated with it. The numbering system is standardized by generally accepted accounting principles (GAAP). The bucket a particular transaction falls into determines the first digit of its number, helping you to organize your list.

Assets

Assets are what your organization owns. Accounts in the assets bucket number in the 1,000s. 

Here are some examples of assets:

  • Checking and savings accounts

  • Investments

  • Accounts receivable

  • Land

  • Buildings

  • Furniture

Liabilities

Liabilities are what your organization owes to others. These go in accounts numbering in the 2,000s. Be sure to include both current and long-term liabilities. For example, any vendor accounts fall under current liabilities, since you need to pay them off within a year. Conversely, a mortgage would be a long-term liability.

Equity

Equity is your overall worth, or your assets minus your liabilities. It is also sometimes called your net assets. Churches generally do not use this section the way businesses do because they are not worried about profit.

In place of the equity section may be a list of funds, such as a general operating fund and a missions fund. We recommend fund accounting for churches because this practice offers increased accountability. Anyone who looks into the funds will be able to clearly see where the church’s equity is held. Equity accounts, and thus funds, number in the 3,000s.

Income

Income is the money you earn. The numerical codes for income accounts are in the 4,000s. For a church, income typically includes the following:

  • Tithes and offerings

  • Pledged contributions

  • Holiday donations

  • Grants

  • Interest and dividends 

sample-church-chart-of-accounts-sectionsOliver is already framing up his chart of accounts!

Expenses

Expenses are what you spend. These accounts start in the 5,000s, but they may continue up into the 6,000s and 7,000s if necessary. Church expenses include the following operating and non-operating costs:

  • Salaries

  • Pensions

  • Grounds maintenance and building repairs

  • Property insurance

  • Office equipment

  • Utilities

  • Missions

  • Advertising

Pro Tip: Different organizations may use slightly different numbers within these broad ranges. For example, building repairs might be listed in the 5200s in one church’s accounts and in the 5400s in another. However, as long as you stick with the five main buckets, you can create a system that works for you.

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Balancing a Detailed vs. General Church Chart of Accounts

While detailed recordkeeping is often valuable, there is such a thing as too much detail when it comes to a chart of accounts for a nonprofit church. Overly long charts quickly become unmanageable.

So what counts as too long? There is no definitive answer to this question, but we do provide some guidance below.

Does This Transaction Warrant a Separate Line Item or Account?

Here are some questions to ask yourself when you are trying to decide whether a certain item merits its own account.

  • Is this item both necessary for recordkeeping and required by accounting principles?

  • Is this item significant in relation to the church’s total assets and expenses?

  • Is there another way to keep track of this item?

If you can answer "yes" to the first two questions and "no" to the third, the item probably needs its own account. If you answer "yes" to the last question, you can probably consolidate the item into an existing account. 

For example, you need to stock your church’s bathrooms with toilet paper. However, the amount of money you spend on toilet paper is probably not significant in relation to your yearly budget. Thus, toilet paper could probably fall under the general heading of "paper products."

Who Is Reading This Chart?

Above all, your church’s chart of accounts needs to make sense to anyone who reads it or enters accounts into it. A dedicated church finance committee might have the knowledge and time to appreciate a very detailed list of accounts. It might value accountability in even the smallest transactions and, thus, want to see them clearly spelled out.

sample-church-chart-of-accounts-balancingMatt is checking out the church chart of accounts template right now!

On the other hand, the church’s highest governing committee might want to focus on broader categories of accounts. In this case, you might benefit from collapsing smaller categories into larger groupings for clarity’s sake. The two reports would contain the same basic information, but one would be more condensed.

Pro Tip: A church accounting software can help you generate reports with differing levels of detail according to who will be reading them. Springly’s accounting suite, a part of our general nonprofit software, has this function.

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Church Chart of Accounts Sample

Within the five main categories, there is a good deal of flexibility in terms of structure. Use this sample chart of accounts as a template to start your own spreadsheet.

Download your sample Church Chart of Accounts Template!

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Final Thoughts

Now it is your turn to make your church’s master list! If you follow a few standard church accounting guidelines, you can create a chart that is easy to interpret. Once you get the hang of the buckets and their numbering systems, you can customize the chart to meet your needs.

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FAQ

💡What is a church chart of accounts?

A church’s chart of accounts is a list of all of its financial transactions divided into five buckets or categories. Find out more. 

🔑 What sections does a church chart of accounts have?

A church’s chart of accounts should have five buckets: assets, liabilities, equity, income, and expenses. Find out more. 

📝 What is the numbering system for a church chart of accounts?

The standard numbering system for a church’s chart of accounts goes in order of assets (1,000s), liabilities (2,000s), equity (3,000s), income (4,000s), and expenses (5,000s and up). Find out more.

 

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Nina
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