Maintaining a balance sheet

by Frank Allen
(Lakeview, Arkansas)

My church is small, and we use a form of fund accounting. One of our members who has had experience in running a business insists that we maintain a balance sheet showing assets, liabilities, and owners' equity). I personally do not see this as being needful, as we give a quarterly accounting of our income and expenditures, and this must always balance to the value of our banking assets. What is your opinion? How should I respond to him?

Comments for Maintaining a balance sheet

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RE: Maintaining a Balance Sheet
by: Kolaktax

Instead of getting caught up in the term "Balance Sheet", set your focus on underlying activities:

ASSETS - LIABILITIES = NET ASSETS

That is,
Cash+Checking+Receivable+Buildings+Investments+OtherAssets-AccountsPayables-LoanPayables=NetAssets

If you build or buy church building, cash will decrease and or liabilities will increase. That means, the build will have to stay on the book and show up on report called Balance Sheet.

Depreciation of the building can be done once a year at year-end for year-end reporting. The only way it will not show up when you print financial report to see your net asset is when it has be sold or disposed by other means.

It will worth it to engage a CPA or an accountant to help you set your accounting book and reporting up.
Comments on Balance Sheets
by: Anonymous - MN

I have to express my agreement with Frank. I would suggest it is quite sufficient to report how much your Mortgage is and how much is in the Bank and other savings instruments to show your financial position.

Assets that are owned by the Church I suspect are quite difficult to report on. Probably the value that your insure your building & contents would be on place to start. You could list the significant assets in a list to show your congregation that significant assets are owned, but to constantly track and report their value goes beyond the scope of a Volunteer who is responsible to maintain the finances of a Church.
More on Balance Sheet
by: Frank

I appreciate Vicky's comment, and she is right, as pertains to an organization that must regularly report its financial position to the IRS or to investors or major donors whose donation includes thia requirement. However, I failed to say that we currently use the single-entry bookeeping method, and we do not report our financial position to anyone other than the memebrs of the congregation. Therefore, I still see no need for a balance sheet, regardless of how "convenient" or "nice" it might be.
Balance Sheet
by: Vickey

He is correct. It is important to track your church's assets and liabilities. You should generate at the very least...an annual balance sheet showing current asset and liability balances.

While tracking your income and expenses and reconciling your accounting and bank statements is very important...knowing how much your assets are worth and how much debt you owe is equally important.

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