Chart of Accounts for a Church

A chart of accounts is simply a list of the accounts and numbers you set up to use in your accounting system. It is the foundation for your entire accounting system, so it is very important...but always remember...it is also ever changing...

A chart of accounts typically lists your balance sheet accounts first:

Then it lists your Statement of Activity (Income Statement) accounts:

As I stated in the beginning of this article, a chart of accounts in a list of your particular church or nonprofit's account and account numbers.

Even though each organization's chart of accounts is unique, most nonprofit and churches use a universal numbering system to avoid confusion for your staff, bookkeepers, accountants, and financial institutions.

Standard Numbering Convention:

Account numbers are often five or more digits in length with each digit representing a division of the company, the department, the type of account, etc.

The account numbers are usually 5 or more digits, so we can break out those main category of numbers into more detailed groups.

Note: if you did an internet search on chart of accounts (COA) numbering...you would find the basic number system above...but when you start drilling it down...you will see a variety of numbering systems. All will appear in the same order (eg: ASSETS: Cash, Undeposited Funds, Receivables, Current Assets, Fixed Assets, etc.) BUT the number grouping will be different, so just remember you can use any numbering system you deem appropriate. Just use the main number used universally and using the remaining digits consistently. 

For example:

ASSETS:

1000 - 1199: Cash and Investments (list your bank account(s) first then investments)

1200 - 1299: Undeposited funds (use this if you are using QuickBooks or something similar)

1300 - 1399: Receivables (if you were using an accounting software such as Aplos...you would probably use 1200s)

1400 - 1499: Prepaid Assets (eg: insurance, postage, etc.)

1500 - 1699: Current Assets

1700 - 1799: Fixed Assets (eg: Land, Buildings, Equipment, etc.)

1800 - 1899: Accumulated Depreciation (if you track depreciation)

1900 - 1999: Other long term assets

LIABILITES:

2000 - 2499: Current liabilities (obligations payable within one year {eg: credit cards, account payables, payroll payables} 

2500 + Longterm liabilities (eg: mortgage payable and vehicle payable)

INCOME:

4000 - 4199: Donations and Support

4200 - 4299: Pledges

4300 - 4399: Grants

Again...this is just an example. Use your own group numbering for these 4000s...just be consistent. 

5000s are another example of different organizations using different numbers. Some churches and nonprofits use them for earned revenues such as  program service fees, membership dues, fundraisers, interest, fixed asset sales. BUT some organizations use 5s for expenses. I don't personally use 5's for expenses as I use 5000's for my for-profit clients' Cost of Goods accounts.

EXPENSES:

6000 - 6999: Operating/Functional Expenses (eg: facilities, salaries, administration, etc.)

The 6000's operating expenses can be grouped even more detailed with group or parent accounts such as Administration, Payroll, Facilities/Grounds, Programs/Ministries, etc.

7000 - 7999: Non-operating Expenses: (eg: missions, ministries, etc.)

8000s: Ask My Accountant: a place to record transactions you don’t know what to do with and you want to review with your accountant reassigned.

Chart of Account Naming and Numbering Tips

As I stated in the beginning of this article, your chart of accounts is important as it is the foundation of your entire accounting system.However, I always advise my clients to start out simple and only with the accounts they are currently using as a COA is definitely a "work in progress".

Here is some tips to keep in mind as you build your COA:

• It is a lot easier to add accounts than to delete them
• Don't use specific names such as ABC dues, Dropbox, and  Amazon Prime...instead use generic account names such as "Dues and Subscriptions". In most accounting software, you can run vendor reports to get more details.
• Use sub accounts! In most software you can use sub accounts to detail donations and expenses out and then collapse those accounts to run more generalized reports. An example of that would be Utilities.
• Use tags in Aplos to designate and identify certain things you want to track and run reports on (instead of building multiple funds) See the bottom of this article for tips on using Aplos tags.
• Do NOT use classes in QuickBooks to track everything under the sun! Uses Products/Services in QBO and Items in QBDT to track designated donations and some programs or Locations/Departments, or even using Donors. 
• Don't double do stuff! For example, using 20 plus income accounts listing all your different fund donations and then using "classes" or "funds" to tack the same categories.

If you are going to use QuickBooks Online or Desktop...get Lisa London's "Accountant Beside You" books for examples of chart of account and setting up QB. She also has online courses now that you can watch in one window while you set up QB for your church or nonprofit in another window!