CNA Getting Started - Accounts: Build Your Chart

Build Your Chart of Accounts

Charts of Accounts are essentially a listing of the various categories for income, expenses, asset, liabilities, and net assets associated with the finances of an organization. While the exact configuration of the line items on a chart of accounts may vary slightly from one entity to another, there are a few basic categories that will be found in just about every accounting ledger.

If your church is not associated with a diocese or parent organization that has mandated you use a static or standard chart of accounts, and if you did not convert your previous application data into ConnectNow Ledger & Payables, you will need to design your own Chart of Accounts. 

If you have not previously designed a chart of accounts, start by reviewing the Statement of Activities (a.k.a. Income Statement or Profit & Loss Statement) and Statement of Financial Position (a.k.a. Balance Sheet) from your old system; as these reports usually contain all of the information you need.

Before you can enter your accounts, you must first review and design the Account Code Levels; Account Type, Entities, Levels, and Sub Accounts.

.

Account Types

The Account Type defines the type of account you’re working with.  There are six account types:

  • Asset – What I have
  • Liability – What I owe
  • Income – What I’ve gained/new money
  • Expense – What I’ve lost/spent
  • Net Asset – What I’m worth
  • Dedicated – of my assets, what’s not really mine 

 

.

Entities

An Entity refers to the various entities you may have that operate within your overall church. Each Entity you create will have its own chart of accounts, which include Assets and Net Assets, and may include: Income, Expense, Liability and Dedicated Accounts

For example, you may want to include an Entity for:

  • Church Operations
  • School
  • Cemetery


Entities Setup lets you define the name and code number of each Entity.

  1. Click the Setup
  2. Click Entities.
  3. Enter the Description and Code.
  4. Click Submit to save.

Entities that you add to your system can be assigned to specific accounts.

.

Levels

The ConnectNow Church Accounting system utilizes a multi-level account code structure that supports multiple entities, categories, cost centers and accounts.  These relationships are easy to define and flexible enough to allow the church to modify or expand the account structure as needed.  With the multi-level account code structure, the church can report on any level(s) of the organization as desired.

As you review the Income Statement and Balance Sheet from your previous application, look at how the various accounts are grouped together.  When you define the Levels, you will be determining how each account is grouped and sub-totaled.  Think of the Level as a “group header”.

While you can have up to five levels of grouping, you are not required to use all five.  If yours is a smaller church with a limited Chart of Accounts, you may only use a single level for each account.

Larger churches with more complex chart of accounts may choose to use multiple levels when defining your chart of accounts.

 

 

 



Define Levels for Asset, Liability and Net Asset Accounts

Within your chart of accounts, you will need to define the levels of your Assets, Liabilities and Net Assets.  The Levels that you assign will be what determines the sort and sub-total on your Statement of Financial Position (a.k.a. Balance Sheet) report.

Under the Asset, Liability, Net Asset section, type a Description and choose the desired number of Digits for each Level for your Asset, Liability, and Net Asset accounts.

NOTE:  Most churches find that a single level with 2 to 3 digits is sufficient under the Asset, Liability, and Net Asset section.  The most common term used in this section is Natural Account.

  1. Click the Setup
  2. Click Define Account Code Levels.
  3. Under the Asset, Liability, Net Asset section, type the Description of “Natural Account” at Level 1 and choose the desired number of Digits for each Level for your Asset, Liability, and Net Asset accounts; enter 2 digits.

    NOTE: Most churches find that a single level with 2 to 3 digits is sufficient under the Asset, Liability, and Net Asset section.  The most common term used in this section is Class.
  4. Select the desired number from the Sub-Accounts Digits field. Recommend 2 digits.
  5. Click Submit to save
  6. Click the Define Levels button next to the Level 1 under Asset, Liability and Net Asset section.
  7. Enter the Description and Code for the Levels desired and click Submit.

 

 

Asset, Liability and Net Asset Account Level 1 Examples

The following are some examples of Level 1 descriptions for the Asset, Liability and Net Asset section.

 

Code

Description

 

1000

Checking and Petty Cash

Asset

1100

Savings and Investments

Asset

1200

Receivables

Asset

1300

Vehicles and Equipment

Asset

1400

Land and Buildings

Asset

2000

Accounts Payable

Liabilities

2100

Payroll Withholdings

Liabilities

2200

Credit Cards

Liabilities

2300

Mortgage and Loans

Liabilities

3000

Net Asset - Equity

Net Assets

 

Add New Asset, Liability, Net Asset Accounts

Now that you have the Entity and Levels set up for the Asset, Liability and Net Asset codes, let’s start entering those accounts.

  • Click Accounts.
  • Click New Account.
  • Type the Description of your church checking’s bank account name (e.g., Lakewood Bank - Church).
  • Select the Account Type Asset from the lookup.
  • Enter the Shortcut number01C for the account. We recommend you utilize the same number as the Natural Account to start the Shortcut number. If you feel you may have additional similar accounts (i.e. multiple church checking accounts) enter the sub-account after the Natural Account separated by a period.  You may also enter alphabetical characters in the shortcut to identify Entity or Department.
  • Choose the Entity Church Operations from the lookup table.
  • Choose the Natural Account Checking & Petty Cash from the lookup table.
  • The system will automatically enter the Sub-Account—the last field of the account code. The Sub-Account field is available to make the account unique if you have two accounts with the same type, Entity, and level(s). You can change this number if needed.
  • Check the Bank Account box in order to make this account available to print checks and for the system’s Bank Reconciliation process.
  • Click the Submit button to save. Your new account will now be available for transactions.

 

 

Description

Type

Shortcut

Entity

Natural Account

Sub-Account

Check Box?

Petty Cash

Asset

1000.02C

1 - Church Operations

1000 - Checking & Petty Cash

02

 

Savings Account

Asset

1100.00C

1 - Church Operations

1100 - Savings & Investments

01

 

School Checking

Asset

1000.01SCH

2 - School

1000 - Checking & Petty Cash

01

Yes

Land

Asset

1400.01C

1 - Church Operations

1400 - Land & Buildings

01

 

Vehicles

Asset

1300.01C

1 - Church Operations

1300 - Vehicles & Equipment

01

 

Payroll W/H – FICA

Liability

2100.01C

1 - Church Operations

2100 - Payroll Withholdings

01

 

Payroll W/H – Federal

Liability

2100.02C

1 - Church Operations

2100 - Payroll Withholdings

02

 

Payroll W/H – State

Liability

2100.03C

1 - Church Operations

2100 - Payroll Withholdings

03

 

Payroll W/H – Other

Liability

2100.04C

1 - Church Operations

2100 - Payroll Withholdings

04

 

Pastor’s Credit Card

Liability

2200.01C

1 - Church Operations

2200 - Credit Cards

01

Yes

Custodian’s Credit Card

Liability

2200.02C

1 - Church Operations

2200 - Credit Cards

02

Yes

Church Mortgage

Liability

2300.01C

1 - Church Operations

2300 - Mortgage & Loans

01

 

Fund Balance Church

Net Asset

3000.01C

1 - Church Operations

3000 - Net Asset – Equity

01

 

Fund Balance School

Net Asset

3000.01SCH

2 - School

3000 - Net Asset - Equity

01

 

 

Don’t forget to click New Account after Submitting the Last Account entered!

 

Notice how the Shortcut Number and Sub-Account number fills in for you!  You just need to remember to change the Shortcut Number when you switch from Assets to Liabilities to Net Assets.  Once you’ve established your Shortcut numbers for the various account types, the system will prompt you with the next available number.


 

Statement of Financial Position (a.k.a. Balance Sheet)

Now that you’ve entered the accounts, let’s check your work!

  • Click Reports.
  • Click Statements > Statement of Financial Position.
  • Scroll to the bottom of the display and click Preview Report.
  • Notice how the accounts are grouped together; the Checking and Petty Cash accounts and the Payroll Withholding Accounts are listed individually yet sub-totaled.

As you are entering the Chart of Accounts for your church, consider how you would like the accounts grouped together on your Financial Statements.  The Grouping would be considered a “Level”.


 

Define Levels for Income, Expense and Dedicated Accounts

Within your chart of accounts, you will need to define the levels of your Income, Expense and Dedicated Accounts.  The Levels that you assign will be what determines the sort and sub-total on your Statement of Activities (a.k.a. Income Statement) report.

Under the Income, Expense and Dedicated section, type a Description and choose the desired number of Digits for each Level for your Income, Expense and Dedicated accounts.

NOTE:  Most smaller churches find that a single level with 3 to 4 digits is sufficient under the Income, Expense and Dedicated section; medium size churches may find that two levels with 2 to 4 digits allow them more flexibility in reporting, while larger churches find that three levels with 3 to 4 digits gives them the most flexibility in reporting. 

For training, we will use the setup for a medium size church and utilize two levels.

The most common terms used in this section are Department (or Category), Cost Center and Accounts.

  1. Click the Setup
  2. Click Define Account Code Levels.
  3. Under the Income, Expense and Dedicated section, type the Description of “Department” at Level 1 and choose the desired number of Digits for each Level for your Income, Expense and Dedicated accounts; enter 2 digits.
  4. Under the Income, Expense and Dedicated section, type the Description of “Natural Account” at Level 2 and choose the desired number of Digits for each Level for your Income, Expense and Dedicated accounts; enter 4 digits.

NOTE:  Most smaller churches find that a single level with 3 to 4 digits is sufficient under the Income, Expense and Dedicated section; medium size churches may find that two levels with 2 to 4 digits allow them more flexibility in reporting, while larger churches find that three levels with 3 to 4 digits gives them the most flexibility in reporting. 

  1. Select the desired number from the Sub-Accounts Digits field. Recommend 2 digits.
  2. Click Submit to save.
  3. Click the Define Levels button next to the Level 1 Department under Income, Expense and Dedicated section.
  4. Enter the Description and Code for the Levels desired and click Submit.

 

 

 

Level 1 – Department


Code

Description

1

General and Administrative

2

Ministry and Liturgy

3

Religious Education

4

Charity and Outreach

5

Preschool and Daycare

6

Cemetery/Columbarium

7

Other Church Programs

8

Facilities

10

Endowments

11

Capital

13

Restricted Donations

  

  1. Click the Define Levels button next to the Level 2 Natural Account under Income, Expense and Dedicated section.
  2. Enter the Description and Code for the Levels desired and click Submit.

 

 

Level 3 – Account


Code

Description

4000

Offertory

4100

Donations, General

4200

Fees

4300

Rental Income

4400

Interest Income

5000

Clergy Compensation

5100

Clergy Benefits

5200

Lay Employees Salaries

5300

Lay Employees  Payroll Taxes

5400

Lay Employees Benefits

5500

Utilities

5600

Office Supplies

5700

Bank Charges

 

 

Add New Income, Expense and Dedicated Accounts

Now that you have the Entity and Levels set up for the Asset, Liability and Net Asset codes, let’s start entering those accounts.

  1. Click Accounts.
  2. Click New Account.
  3. Type the Description of your weekly offering, such as Offertory.
  4. Select the Account Type Income from the lookup.
  5. Enter the Shortcut number 40001GEN for the account. We recommend you utilize the same number as the Natural Account to start the Shortcut number. If you feel you may have additional similar accounts (i.e. multiple church checking accounts) enter the sub-account after the Natural Account separated by a period.  You may also enter alphabetical characters in the shortcut to identify Entity or Department.
  6. Choose the Entity Church Operations from the lookup table.
  7. Choose the Department General from the lookup table.
  8. Choose the Natural Account Offertory from the lookup table.
  9. The system will automatically enter the Sub-Account—the last field of the account code. The Sub-Account field is available to make the account unique if you have two accounts with the same type, Entity, and level(s). You can change this number if needed.
  10. Click the Submit button to save. Your new account will now be available for transactions.

 

 

 

Description

Type

Shortcut

Entity

Department

Account

Sub-Account

Bequests, Unrestricted

Income

4100.01GEN

1 - Church Operations

1 - General and Administrative

4100 - Donations, General

01

Poor Box Receipts

Income

4100.02GEN

1 - Church Operations

1 - General and Administrative

4100-Donations, General

02

Hall Rental Income

Income

4300.01HALL

1 - Church Operations

1 - General and Administrative

4300 - Rental Income

01

Gym Rental Income

Income

4300.01GYM

2 - School

1 - General and Administrative

4300 - Rental Income

01

Interest Income

Income

4400.01GEN

1 - Church Operations

1 - General and Administrative

4400 - Interest Income

01

Religious Ed Tuition

Income

4200.01RE

1 - Church Operations

3 - Religious Education

4200 - Fees

01

School Tuition

Income

4200.01SCH

2 - School

5 - Preschool and Daycare

4200 - Fees

01

Pastor’s Salary

Expense

5000.01GEN

1 - Church Operations

1 - General and Administrative

5000 - Clergy Compensation

01

Secretary’s Salary

Expense

5200.01GEN

1 - Church Operations

1 - General and Administrative

5200 - Lay Employees Salaries

01

Custodian’s Salary

Expense

5200.01FAC

1 - Church Operations

8 - Facilities

5200 - Lay Employee Salaries

01

Payroll Taxes

Expense

5300.01GEN

1 - Church Operations

1 - General and Administrative

5300 - Lay Employees  Payroll Taxes

01

Pastor’s Health Insurance

Expense

5100.01GEN

1 - Church Operations

1 - General and Administrative

5100 - Clergy  Benefits

01

Employee’s Health Insurance

Expense

5400.01GEN

1 - Church Operations

1 - General and Administrative

5400 - Lay Employees  Benefits

01

Electricity

Expense

5500.01FAC

1 - Church Operations

8 - Facilities

5500 - Utilities

01

Water, Sewer and Garbage

Expense

5500.02FAC

1 - Church Operations

8 - Facilities

5500 - Utilities

02

Telephone/ Internet/Cable TV

Expense

5500.02FAC

1 - Church Operations

8 - Facilities

5500 - Utilities

03

Office Supplies – Church

Expense

5600.01GEN

1 - Church Operations

1 - General and Administrative

5600 - Office Supplies

01

Office Supplies – RE

Expense

5600.01RE

1 - Church Operations

3 - Religious Education

5600 - Office Supplies

01

Office Supplies – School

Expense

5600.01SCH

2  - School

1 - General and Administrative

5600 - Office Supplies

01

Bank Charges

Expense

5700.01GEN

1 - Church Operations

1 - General and Administrative

5700 - Bank Charges

01

Don't forget to click New Account after Submitting the Last Account entered!

 

Shortcut numbers may also contain alphabetical characters and symbols.  If you have similar accounts for different Entities or Departments, you may find it helpful to use the same four digit Shortcut number with an alphabetic abbreviation for the different Entity/Department.  If you know you may have more than one account with the same basic code, you can enter .01, .02, .03 after the first four digits to keep them separate. 

For example, if you have an Office Supply expense for the Church, Religious Education and School, enter the shortcut numbers as follows:

·         Office Supplies Church = 5600.01GEN

·         Office Supplies RE  = 5600.01RE

·         Office Supplies School = 5600.01SCH

As you do your data entry in the system, you simply need to remember to enter 5013 for Office Supplies and you will be able to select the correct account.

 

Notice how the Shortcut Number and Sub-Account number fills in for you!  You just need to remember to change the Shortcut Number when you switch from Income to Expenses to Dedicated.  Once you’ve established your Shortcut numbers for the various account types, the system will prompt you with the next available number.


 

Statement of Activities (a.k.a. Income statement)

Now that you’ve entered the accounts, let’s check your work!

  1. Click Reports.
  2. Click Statements > Statement of Activities.
  3. Under Define Report Group Sections and Sorting, set the Group Section 1 to Department.
  4. Scroll to the bottom of the display and click Preview Report.
  5. Notice how the accounts are grouped together; the General and Administrative accounts and the Religious Education accounts are listed individually yet sub-totaled.
  6. Click the Back button on your internet Browser to get back to the report selection display.
  7. Under Define Report Group Sections and Sorting, set the Group Section 1 to Account.
  8. Scroll to the bottom of the display and click Preview Report.
  9. Notice how the accounts are now grouped together; the Donations, General accounts and the Rental Income accounts are listed individually yet sub-totaled. 
  10. Click the Back button on your internet Browser to get back to the report selection display.
  11. Under Activity Account Dimension Filters, click the Department Religious Education.
  12. Scroll to the bottom of the display and click Preview Report.
  13. Now you can see only those accounts related to the Religious Education department. This type of report would go to your Director of Religious Education!


 


Sample Account Code Levels

Due to time constraints in training, we can only enter a small sampling of accounts.  The following is a complete sample list of levels and accounts that you may choose to incorporate into your churches chart of accounts.

 

Asset, Liability, Net Asset Account Levels

 

Code

Description

1000

Checking and Petty Cash

1100

Savings and Investments

1200

Receivables

1300

Vehicles and Equipment

1400

Land and Buildings

2000

Accounts Payable

2100

Payroll Withholdings

2200

Credit Cards

2300

Mortgage and Loans

3000

Net Asset - Equity

 

 

 

Income, Expense and Dedicated Account Level Examples

The following are examples of tri-level account structure codes for the Income, Expense, and Dedicated Account Types generally used by larger churches.  If you are a medium size church, you may choose not to utilize the Cost Center concept and only use Department/Category and Accounts.  If you are a smaller church, you may choose to not utilize the Department and Cost Center concept and only use the Accounts.

Only enter the codes that would be appropriate for your church.  Levels and Accounts may be added, changed or deleted (if not in use) at any time.

 

Level 1 – Department

Code

Description

1

General

2

Ministry and Liturgy

3

Religious Education

4

Charity and Outreach

5

Preschool and Daycare

6

Cemetery/Columbarium

7

Other Church Programs

8

Facilities

9

General and Administrative

10

Endowments

11

Capital

12

School

13

Restricted Donations

 


 

Level 2 – Cost Center

Code

Description

1

General Church Revenue

2

Liturgy

3

Music

4

Evangelization

5

Family Life

6

Stewardship

7

Hispanic Ministry

8

Religious Articles for Sale

9

Ministry and Liturgy General

10

Children’s Religious Ed

11

Youth Religious Ed

12

Adult Religious Ed

13

Youth Ministry

14

Community Life

15

Church Nurse Program

16

Charity General

17

Preschool

18

Daycare

19

Cemetery

20

Columbarium

21

Other Church Programs General

22

Facility Expense – Church

23

Facility Expense – Rectory

24

Facility Expense – General

25

Finance Administration

26

General and Administration

27

Endowment Gains/Losses

28

School – General

29

School – Administration

30

School – Facilities

31

School – Cafeteria

32

School – Programs

33

Restricted Donations

 


 


Level 3 – Natural Account

Code

Description

4000

Offertory

4100

Donations, General/In Kind

4150

Bequests, Unrestricted

4200

Subsidies

4250

Fundraising Activity Revenue

4300

Fundraising Activity Expense

4350

Tuition and Fees

4400

Tuition Assistance

4450

Product Sales Income

4500

Rental Income

4550

Interest Income

4600

Gain/Loss Disposal of Assets

4650

Other Income

4700

Capital/Facilities Fund General

4750

Debt Reduction Collection

4800

Gain/Loss on Endowments

 

5000

Clergy Compensation

5100

Clergy Benefits

5150

Extra Clergy Compensation

5200

Lay Employees – Salaries

5250

Lay Employees – Payroll Taxes

5300

Lay Employees – Benefits

5350

Depreciation

5400

Equipment & Furnishings

5450

Equipment Repairs & Servicing

5500

Building Repairs, Maintenance, Improvements

5550

Janitorial Service & Supplies

5600

Grounds Maintenance

5650

Property/Liability Insurance

5700

Property Tax

5750

Building Rent

5800

Utilities

5850

Church Events/Programs

5900

Program Supplies

5950

Curriculum/Instructional Supplies

6000

Vehicle Lease/Maint Expense

6050

Mileage Reimbursement

6100

Travel & Meal Expense

6150

Professional Services

 

 

 

6200

Religious Supplies

6250

Collection Envelopes

6300

Office Supplies

6350

Postage

6400

Copying

6450

Communication

6500

Bank Charges

6550

Small Office Equip & Furniture

6600

Computers & Peripheral Equipment

 

6650

Professional Development

6700

Books, Periodicals & Subscriptions

6750

Interest Expense

6800

Miscellaneous

6850

Charity

8000

Donations, Restricted

8100

Restricted Donations Expended

9000

Bequests, Restricted

 

 

 

 

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