I need help understanding the church’s Income Statement

First of all, Income Statement is just the generic term I use for the financial report that tells you the income and expenses. I’ve seen this called the Statement of Activities or Treasurer’s Report or Budget Report or Statement of Profit & Loss or just simply the P&L.

The most important thing, can you quickly and easily see how the church is doing for the year? This is one of those financial reports that tends to get longer and longer. The Finance Committee and the treasurer/bookkeeper often need all the details, but the Board and the pastor need this as simple as possible. Here are some pointers for simplicity:

  • SUMMARIZE: Most accounting systems will allow you to have different levels of detail (subaccounts in QuickBooks). Use these. This way you can track the details, but still produce a one-page report.
  • ORGANIZE LOGICALLY: Again, use subaccounts if possible because then you can easily group expenses by the committee or position responsible for that part of the budget. If I’m responsible for worship, I don’t want to hunt through the report to find the 5 or 10 lines that are important for me.
  • ADD COLUMNS: Most accounting systems will let you customize what columns show up. I always like see how income and expenses compare to the budget and to last year.
  • SEGREGATE: Do not intermingle unrestricted income and expenses with those that are donor restricted. You need to have a bottom line that just reflects General Fund (i.e., unrestricted) net income.

In the video I give you an overview of a fairly clean Income Statement for a typical church. I also point out some places for quick improvement.

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