First of all, Balance Sheet is just the generic term I use for the financial report that tells you what the church owns (Assets), what the church owes (Liabilities), and what restrictions exist (Equity or Net Assets). I’ve seen this called the Statement of Financial Position or Treasurer’s Report quite often.
Second of all, you are in the majority if it doesn’t make sense to you. I’ve been an accounting professor for two months now. Accountants and financial people are just wired differently. They can look at a page of numbers and effortlessly understand it.
If finances and accounting come easy to you, you are in the minority. Be patient with those that are struggling. Don’t look down on them. Instead, do your best to make sure you are helping them to understand…at least the important numbers.
In the video, I give you a quick overview of a typical church Balance Sheet from QuickBooks. Hopefully it’s a help. After you watch the video, here’s some questions.
- Are all the Assets & Liabilities we need to track on the Balance Sheet? – Are investment accounts are loans missing?
- How is our money invested? – Not only where is it invested, but how is it invested? Is long-term money invested for long-term results?
- How often are Investments and Debt balances updated? – Sometimes these can get forgotten and stay the same for the whole year. It’s motivating to see debt go down. It’s insightful to see investments going up and down. The unknown often brings fear.
- How can I tell how much is unrestricted? – There should be some system for showing how much money is unrestricted and how much is donor restricted. You should never cashflow with donor restricted dollars.
In the video, I give you an overview of my template which is linked below.
Useful Links
- Balance Sheet Template: https://jctaccounting.com/wp-content/uploads/2022/10/balance_sheet.xlsx
- QuickBooks Chart of Accounts Template: https://jctaccounting.com/wp-content/uploads/2022/10/quickbooks_online_coa_sample_file.xls
- Dakotas Methodist Foundation. https://www.dakotasumf.org
- DWU: https://www.dwu.edu/
THANK YOU! I needed this and much more! Looking forward to your other webpages and videos on this topic!
I’ve watched your videos, trying to answer (unsuccessfully) this question: “While comparing a Balance Sheet of 1st day of month to a Balance Sheet of the last day of the same month, should the Balance Sheet difference of the two Net Assets value always be equal to what is seen for Net Income on that month’s I & E report?”
This is a really good question. The Net Income from the shows up on the Balance Sheet…usually at the very bottom of the Net Assets section. This is because the accounting equation where assets = liabilities + net assets.
Most accounting programs will automatically move the Net Income to Retained Earnings (sometimes called Prior Period Earnings or similar) at the beginning of the next year. For example, a church balance sheet might show on Dec 31 a net income of $3,500 and a retained earnings of $34,250. On Jan 1, the Net Income will disappear, but the retained earnings will now be $37,750..
Thanks for the video – Would you explain the proper journal entry needed to update an investment account that fluctuates in value with the stock market? And as a bonus question, what do you do if that investment account holds two or three restricted funds for the church? How does those fund values get updated? Thank you!
I love this question. My assumption is that the church is using QuickBooks or something similar. If the investment is held for the benefit of the General Fund, I would create an Account for Investment Income/Loss in the Other Income section. This way it appears below the Operating Income and Expenses.
Usually Monthly or Quarterly, I would update the investment balance. If it is a gain, you would debit the Investment asset, and credit the Investment Income/Loss.
For restricted funds, I like to account for their balances in the Net Asset or Equity section of the Balance Sheet. In this case, I would again debit the Investment asset for a gain, and credit the corresponding Equity accounts for each restricted fund related to the investment.