At its core definition, a chart of accounts is a financial, organizational tool that indexes every arrangement in an accounting system. This provides insight into all the financial transactions of the company, or in this instance, your church!
One of the largest hurdles for the majority of churches and nonprofits when it comes to bookkeeping is ensuring that anyone who volunteers, interacts, or is a part of the organizational structure for the accounting is always in the loop.
Read more about our best tips for getting started with church accounting here.
The Basics
A chart of accounts typically lists your balance sheet accounts first, or:
- Assets — what you own
- Liabilities — what you owe
- Equity — net assets
Next, you’ll find it lists your Statement of Activity or Income Statement accounts. This section will include your church’s income as well as your church’s expenses.
While each church’s chart of accounts will vary and be unique, know that most nonprofits and churches use a universal numbering system that can aid your staff, bookkeepers, accountants, and/or financial institutions.
Using Standard Numbering Conventions
As previously mentioned, the majority of churches and nonprofits, thankfully, use a universal standard numbering convention to ease the process of tracking your chart of accounts and ensuring your classifications are correct.
These account numbers are usually five or more digits in length with each digit signifying a division of the company, the department, the type of account, etc. The account numbers represented allow you to break out those main categories of numbers into more detailed groups.
Remember, your “list” is unique to your church or nonprofit’s needs and the accounts therein. Below, we’ve outlined an example of what you can typically expect your convention to look like based on the typical financial aspects you’ll find:
- Assets — 1000 range
- Liabilities — 2000 range
- Equity — 3000 range
- Income — 4000 range
- Personnel Expenses — 5000 range
- Facility Expenses — 6000 range
- Ministry Expenses — 7000 range
- Outreach Expenses — 8000 range
As a general rule, anything in the 9000 range is typically items to leave to a professional or your bookkeeper to attend to!
Organizing Your Chart of Accounts
Building out your list for your chart of accounts is half the battle! The other aspect is the organization of your chart of accounts, not only for internal tracking but with succinct naming conventions that work for you and your team.
Here are a few of our pro tips for getting started with organizing and tracking your chart of accounts:
- Adding accounts is easier than deleting them
- Use generic accounting categorizations
- Define the levels of your assets, liabilities, and net assets
- This will help with sorting and subtotals on your balance sheet
- Figure out how you want your accounts grouped on balance sheets
- Define the levels of your income, expense, and dedicated accounts
- This will help with sorting and subtotals on your statement of activities or income statement
- Pay bills using vendor invoices, not statements
Keeping your chart of accounts organized is a critical part of the process, so it’s important to have your team solidified when working on them. Using accounting software that makes that job easier is where we come in!
How Our TrackYourFunds Software Can Help
TrackYourFunds is built with your unique chart of accounts in mind, allowing you to set up your own classifications, user-defined groupings, and identifiers to make organization and tracking a breeze!
Our software is easy-to-use with helpful guides and tutorials that will make your entire accounting process more seamless.
