Church Accounting
When most people think of accounting, they think of taxes. Those who are more versed in accounting may think of auditing or US GAAP. What about those people who just need to account for their church or small business? Luckily they need not memorize the IRS tax code.
Basic Accounting
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 track helpful information, most churches use what is called fund accounting. The word “fund” means a reserve of money set aside for some purpose. Fund doesn’t necessarily mean a separate bank account. A church may have one bank account with hundreds of funds.
Why do Churches Use Fund Accounting?
To understand why churches use fund accounting, it helps to compare them to a normal, for-profit organization. When you buy groceries at a local Food Market, you have no say over what the Food Market uses your money for. When you donate money to a church, you can tell them what you want the money to be used for. The church than sets aside a fund for your money.
Church Management Software
Now that you can see that a church accounts for its money differently than a normal business, you can see the usefulness of church accounting software. This type of software makes it easy to set up and manage funds.