church accounting

[S T]

I know several of you on this message board deal with church accounting, and I could use some assistance and guidance.

Assisting a Church on Financial statements to hopefully acquire a loan for expansion, for a Youth facility.

Question, how to record amounts for permits, architectural plans, rennovations or additions -

Would they be recorded as a Capital Asset and then record the appropriate depreciation each year? Right now the Church is recording as expense which seems to be "skewing" the income statement. Funds/Income for this expansion have been accumulated in a Building Fund and recorded as income.

Thanks

Sandy

[ATSMAN]

I know several of you on this message board deal with church accounting, and I could use some assistance and guidance.

Assisting a Church on Financial statements to hopefully acquire a loan for expansion, for a Youth facility.

Question, how to record amounts for permits, architectural plans, rennovations or additions -

Would they be recorded as a Capital Asset and then record the appropriate depreciation each year? Right now the Church is recording as expense which seems to be "skewing" the income statement. Funds/Income for this expansion have been accumulated in a Building Fund and recorded as income.

Thanks

Sandy

Sandy unless there is something special, I would capitalize the costs associated with a new building and not deduct as expense in the current year.

[Corduroy Frog]

Non-Profit Accounting

Sandy, the accounting rules for not-for-profit entities differ greatly from what we are accustomed.

For example, there may or may not be any significance to depreciable lives. Depreciation expense
is optional depending on the practices of the entity. There is no tax "deduction" as such because
there are no income taxes unless there is a taxable business segment.

Normal "fund" accounting considers only revenue and "expenditures". Even a capital item is
considered an expenditure even though we don't consider it to be an expense. It is an immediate
expenditure unless the entity has a capitalization policy. And fund considers an expense at the point
the money is available and appropriated rather than when the payment is made.

Church accounting usually ignores the concept of appropriations but is reduced to simple revenue
and expenditures. Money spent for an elaborate speaker system is an expenditure just like buying
a roll of toilet paper.

I am certainly not an expert on not-for-profit entities, and I'm rusty as well. Since our main focus is
on taxation, well-informed sources may not be abundant among our forum participants. I'm sure
some of our CPAs can be helpful on this however.

[Kurly]

Church Accounting

I have used reference material from Worth Financial. They specialize in Church accounting. Search for Worth Financial. In your search engine.

Web site WorthFinancial.com

Kurly

[S T]

Thanks all for posting - I do understand and know that Church Accounting is different than a Regular Business Accounting. Not proficient at it, but learning very quickly with resources.

The Church Pastor, Church Secretary and I arrived at a way with auxillary reports that reflect monies accumulated in prior periods for the Bldg Remodel/Rennovation/Expansion and the monies for the "same" being paid out in another period. Hard to provide annual Financial Statements and have them reflect correctly on Church Accounting -- as Snags says "revenue and expenditures"

Hopefully that will answer all of the "lender's" questions

Sandy

[BOB W]

The correct words are "Sources & Uses of Funds". When it comes to your issue, I would keep a "side" accounting of the costs of all building expenses. This would also apply to any large outlay that we, as tax accountants, would normally keep as a record for historical purposes. You never know when that info becomes important in the future.

[S T]

More on the Church Accounting (also referred to as Fund Accounting)

All is set up to report Source Income (Revenues) and Uses of Funds (Expenses) -(Dr) Mortgage Expense and (Cr) Cash/Bank)
Now an accounting item as this is different from regular business accounting, as determined and discuseed in prior threads - We would normally set up to (DR) Mortgage Interest and (DR) Mortgage Loan Liability and (CR) Cash/Bank

Mortgage Payment - is recorded to Bank and Mortgage Payment Princ/Interest on the Income/Expenses Stmt for each monthly payment - but this does not reflect the reduction on the Mortgage Loan - Long Term Liability - Balance Sheet.

How to record the reduction on the Loan for princ payments? Seems like from reading resources on "Fund Accounting" what I read is that I would then make an end of period adjustment from Equity to Loan Liability to reflect the correct loan balance. (2nd Part) is a JE .

Any suggestions or guidance

Thanks

Sandy