Trap #8 Violating basic accounting rules and practices (Part 1)

Jul 20, 12 • NewsNo Comments

In order to make good and timely financial decisions a church must have a strong financial REPORTING system.  This system will also provide the transparency and accountability in financial activity that all churches should strive for.  The end-product of a strong system is a complete set of financial statements that give a clear picture of where the church is (balance sheet) and where it has been (income statement)

Now, what I am NOT saying is you must prepare statements just like your CPA does at the conclusion of your audit.  Those statements have a different purpose than your internally generated statements. (Audits are for the public, internal f/s are for management)  In fact very few, (if any) of our church clients produce monthly financial statements that are strictly in accordance with generally accepted accounting principles (GAAP).

Instead, they produce budget reports, that help them monitor and manage cash flows on a month by month, or even a day by day basis.  And we are OK with that.  We can convert this to GAAP at year end.  Let me modify; we are ok with that as long as the church sticks to basic accounting/bookkeeping rules and practices. 

During the next few posts, we are going to be describing some of the “violations” we have spotted that have led to problems within a few churches.  And I am not referring to trouble from their auditors. It’s much worse than that. Their “violations” led to trouble with their members!

In the meantime, if you have a few good stories about unorthodox church practices, why don’t you share them with us…

PS – Unorthodox when it comes to accounting/bookkeeping.  No theology please….

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