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Accounting In Church

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

Basic accounting involved tracking what was useful to the individual or group of individuals. Merchants used accounting to track which goods were selling best. Hunters to track which weapons worked best. And farmers to track which tools worked best.

Instead of using accounting as a tool, most think of it as busy work. This is probably because the nature of accounting has changed from tracking to 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 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

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.

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