Balance Sheet

[CoveBaptist]

I began keeping our church books with little accounting knowledge, learning much over the years using Powerchurch. In closing this year, I am trying to further udnerstand the balance sheet. I understand my assets and where that total comes from. However, I cannot understand what comprises Net Unrestricted Assets or Total Equity. Since I cannot find a rhyme or reason to these numbers I don't know if over the years, I have posted something incorrectly which threw this off. My Total Liabilities and Equity is the same as My Total Assets - is this a coincidence or does it mean it's correct. Any explanation anyone can offer would be greatly appreciated. I really want to UNDERSTAND!!! Thank you!

[NeilZ]

I began keeping our church books with little accounting knowledge, learning much over the years using Powerchurch. In closing this year, I am trying to further udnerstand the balance sheet. I understand my assets and where that total comes from. However, I cannot understand what comprises Net Unrestricted Assets or Total Equity. Since I cannot find a rhyme or reason to these numbers I don't know if over the years, I have posted something incorrectly which threw this off. My Total Liabilities and Equity is the same as My Total Assets - is this a coincidence or does it mean it's correct. Any explanation anyone can offer would be greatly appreciated. I really want to UNDERSTAND!!! Thank you!

This is correct ...

As far as a full explanation, this wikipedia entry may help:
http://en.wikipedia.org/wiki/Balance_sheet

Remember when reading the article, churches do operate on a cash basis, thus would not have anything such as inventory.

[JohnDMeyers]

Here is a previous post, where I took a stab at explaining net assets.

viewtopic.php?f=3&t=6870&p=23310&hilit= ... ets#p23310

I also have a link to my tutorial on explaining closes-to. I don't know the posting rules about external links, so I will submit this to the moderators to see if I can post this link here. It's a video where I explain, closes-to.
http://www.empoweryourchurch.com/subscr ... -to-v11_5/

[Zaina]

All income and expense accounts are periodic accounts. Meaning they measure in and out over a period of time, in this case a year. At the end of the fiscal year, we don't want to lose that 'net effect' at the end of the year when they zero out to start tracking the next year. All income and expense accounts should close to a 3000 account. Some people call them net assets, some call them equity, some call them fund balances but all these names refer to the same group of accounts usually in the 3000s range (unless you have a customized chart of account ranges).

So if you take in $10,000 in income and have $8,000 in expenses, that $2,000 of excess income rolls over to a net asset (some 3000) number at the end of the fiscal year. It should reflect, in very very general terms, what the church's net worth is. Meaning all the money in the bank plus all the assets (building, land, vehicles, furniture etc) should equal your total equity or worth. On a balance sheet, you want your total assets to exactly match you total liabilities + equity.

There is a default account, unrestricted net assets, that the program will close new income and expense too unless you tell it otherwise. Unrestricted simply means that this is a net worth that has no restrictions on it and in general, refers to money the church can spend on whatever they deem necessary. If all of your money was unrestricted, then this unrestricted net asset would be the ONLY 3000 account you need. But with churches, there is generally some restricted money so in that case, you need additional 3000s range account to show those restrictions.

So, in the example above if all the money was unrestricted then the default account would have the $2,000 on the balance sheet at the beginning of the next year. But with restrictions, maybe you have a donor restriction called Missions. Missions should have a 3000s number, let's say 3220. It would also have an income account (maybe 4220) closing to that 3220. Supposing we took in $500 for Missions and didn't spend any of it in this current year, the breakdown on the balance sheet would look something like:

Bank $2000
Unrestricted Net Asset $1500
Restricted Mission Net Asset $500

This tells us that $1500 in the bank can be spent on paying bills, electric, water, etc or funding projects of the church's choosing. But that $500 of the money in the bank is restricted to be spent only on Missions.

Hopefully this helps.