A major difference between business accounting and accounting for nonprofit organizations is the use of “funds.” By definition, a Fund is a separate accounting entity with its own income, expense, assets, and liabilities, and a unique reason for being (for example, to pay operating expenses). The assets in these funds usually fall into three categories:
» Unrestricted—These assets can be used for any purpose.
» Temporary Restricted—These assets are usually restricted by purpose (buying a new organ) or possibly by time (annuity).
» Permanently Restricted—These assets are also restricted but never expire.
In Shepherd’s Staff, we see many churches have one General Fund for the Unrestricted Assets. This fund is usually responsible for paying the everyday operating expenses like salaries and supplies. Beyond that you could have a Building Fund, a Memorial Fund, or even just a Restricted Fund.
However you are not required to keep these funds separate. For this reason, Shepherd’s Staff allows you to separate your assets into these separate funds or you can also keep them in just one fund.
As part of each major fund, such as the general fund or the building fund, many congregations have several small temporary restricted assets resulting from memorials, special collections, and other designated gifts. Shepherd’s Staff uses a special type of account called the “Dedicated Account” for these assets.
Dedicated accounts are usually small and short lived enough to allow you to keep their money in the bank account belonging to one of the major funds. Dedicated accounts accumulate both receipts and disbursements so you can constantly track the amount available for a specific purpose.