Bookkeeping for Non-Profits and Churches: What You Need to Know

While for-profit businesses focus on the bottom line, non-profits and churches must focus on stewardship, transparency, and compliance. The accounting rules for these organizations are fundamentally different.

The Basics of Fund Accounting

Unlike standard businesses, non-profits use 'fund accounting.' This means tracking money based on its designated purpose rather than just lumping it all into a general operating account. If a donor gives $5,000 specifically for a building fund, those dollars are restricted and must be tracked and spent accordingly.

Tracking and Acknowledging Donations

Properly recording contributions is vital for both your internal records and your donors' tax deductions. You must provide timely, accurate contribution statements to donors, clearly noting whether any goods or services were provided in exchange for their gift.

Maintaining Tax-Exempt Status

Losing 501(c)(3) status is a nightmare scenario for any non-profit. Ensuring proper filing of the annual Form 990 (or 990-N/990-EZ) and maintaining impeccable records of board minutes, executive compensation, and restricted funds is absolutely critical.

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