ABSTRACT
The subject of Church Administration has not been talked much about and practiced among the grass roots churches in some Christian settings. This is obvious in the African settings; therefore, the issue of accountability, transparency, and check and balance with reference to how church’s resources have been handled is ignored due to the lack of education and practice on this subject. It is based on this problem and proactive response that this piece of works on the subject has been produced to educate church’s worker or the Financial Committee of Praise Ministries International churches to account for ministry’s resources quarterly or monthly in order to put financial integrity into place.
In this document, chapter one delineates on the theological foundation, the types, the church biblical obligations, the facets, and the tenants of Church Administration while introducing the sub-themes under each in order to give detailed overview about the subject on Church Administration.
Chapter two introduces Church Accounting, the best practices, specialized services for Church Accounting, and accounting terminologies in order to give informed decision to the field of accounting and bookkeeping to prepare the accountant or the responsible individual for the application of the field of accounting in the church’s setting to manage church’s funds.
Chapter three introduces Ledger Double-entry Accounting Bookkeeping with reference to the rules of balancing and calculating ledger and balance sheet in order to give the statement of financial position to maintain financial integrity and assessment in the church. Chapter four delineates and demonstrates the application of the Ledger Double-entry Accounting Bookkeeping using the case study in the church’s setting to analyze, to synthesize, and to come up with the solution based on the question asked that references what happens daily in the church’s setting regarding financial transaction in order to maintain financial stewardship.
Chapter five introduces documentations with reference to financial transactions, documenting, filing systems, budgeting, and banking in the church’s setting. It is with the anticipation that this instrument be used to help church’s workers to manage the works that God has entrusted them with reference to Christian stewardship in Church Administration.
CHAPTER ONE:
INTRODUCTION TO CHURCH ADMINISTRATION
The church known as ekklesia in Greek, signifing “The Called Out One” can be described in many terminologies as the body of Christ, the family, or the bride of Christ. Based on these descriptions, the church is important to God, who is the Architect of her existence. Considering the current trend for the paramount of the church, there is the need to recognize the need for leadership and organization. The church primarily is called to fulfill the mission of God defined in the Great Commission (Matt 28:16–20); for this reason, the church has a huge responsibility before her. The church will be limited and incapacitated to fulfill her mission in the absence of leadership and proper administration put into place to run various programs; therefore, there is the need for church administration fully put into place to run church’s programs.
Church administration is the government of the church organized purposely for the development of church policies, the daily running of church’s programs, planning of activities, scheduling of church’s events, and conducting of payrolls to compensate church’s workers. Biblically, church administration is supported in the Scripture; therefore, it is expedient that these biblical supportive verses that address church administration and its importance taking into consideration the church as the custodian of God’s resources (talents, life plans, times, schedules, and treasures) be looked at exegetically.
The Theological Foundation of Church Administration
Church Administration began with God in the genesis; therefore, the failure to adhere to church administration is the stemming of the Scripture that delegitimizes biblical stewardship. That’s being said, it forms the stewardship of management of fundamentalisms (life plans, talents, treasures, and times) based on biblical doctrine as biblical stewardship is defined in the contextualization of the divine economy (Matt 25:14–30). While it is expedient to study the Scriptures that back the theological foundation of church administration, the following Scriptures have been selected biblically to authenticate and to cement the doctrine of church administration. John writes, “Again Jesus said, “Peace be with you! As the Father has sent me, I am sending you” (John 20:21 NIV). Based on this Scripture, Jesus was the First God Sent; then, the disciples became the second God sent. When one is sent by an individual, one automatically assumes the hands, the feet, and the mouth of the sender by virtue of one’s assignments. When God sent Jesus to the world, Jesus’ feet, hands, and mouth became God’s; similarly, when Jesus sent his disciples on mission, Jesus’ feet, hands, and mouth became theirs by virtue of their assignments. To achieve the goal of the mission, church administration helps the church to achieve the goal as members of the body of Christ use their hands, feet, and mouths to render services to the kingdom of through church administration. The feet, hands, and mouths represent metaphorically church administration as used in the passage. Apostle Paul writes, “ For just as each of us has one body with many members, and these members do not all have the same function,so in Christ we, though many, form one body, and each member belongs to all the others” (Rom 12:4–5 NIV). In this passage, Apostle Paul describes the church as the body with many members. In the collective whole, individual member in the church has talents or abilities in the organized fashion that constitute church administration. In the church, some are gifted to lead, to teach, to preach, or to write; therefore, biblically, God has ordained and endorsed church administration before the foundation of the world and wants individual members of the church to be involved. Paul continues, “The reason I left you in Crete was that you might put in order what was left unfinished and appoint elders in every town, as I directed you” (Titus 1:5 NIV). Apostle Paul instructs Titus and Timothy to appoint leadership in the church in Crete with responsibilities so that everyone discharges according to his or her placement in the church. God is the God of administration; therefore, it is God’s aspiration that the church functions administratively to have things done in fashion according to His will. If the church is unable to account for the resources God has given her to put into place integrity so that those who are following her will learn from her, it will be impossible for the church to achieve her goal as the result of lack of stewardship capability. The Book of Matthew Chapter 25:14–30 warns the church of lacking stewardship capability. If the people, whom the church is leading, cannot trust her as the result of lack of transparency and accountability, the church will not succeed because God himself will not trust the church; therefore, the church will lose future funding due to the lack of accountability. Church’s members want to see what leadership does with the offerings and tithes and other donations made to the church. The leadership accomplishes this goal when she reports periodically on finance and other related matters relevant to the church that require information dissemination to church’s memberships.
Types of Church Administration
Congregationalism
This church administration is the system of organization among Christian churches whereby individual local churches are largely self-governing. Churches that operate under this administration are Protestant churches in the Calvinist tradition that operate independently and automatically on their own affairs. Praise Ministries International has a moderate congregationalistic church politics; therefore, her church administration is congregational church led leadership administration influenced by the General Overseer collaboratively; however, the pastor-in-charge remained the leader of the congregation.
Elder-Led Churches
Elder-Led Churches is the type of church administration whereby specific people are approved to make decision on behalf of the church. Elder-Led churches give the highest authority to the pastors and elders in the church. Elder-Led Churches are Presbyterianism emergence churches wherein specific people are allowed to make decision on behalf of the congregations. This example is seen in Acts 6:1–7 where the seven men are chosen by the apostles to serve without congregational interference.
Denominationalism
This church administration is the type whereby the church is organized with one person or group of leaders that govern over all churches established under that denomination. This indicates that decisions made outside the individual church’s perimeter will affect the church.
The Church Fiduciary Obligations
Fiduciary obligation involves the trust, especially with regard to the relationship between a trustee and a beneficiary. Under the church’s situation, pastors are trustees held accountable before God and the congregations they are leading; in this regard, the congregations become the beneficiaries. The church as the collective whole has a fiduciary obligations toward her membership. Understanding that the church is an organism as opposed to organization, defines the church to be living. The Bible describes the church as the temple of God (1 Cor 3:16), the dwelling place of God in the Spirit (Eph 2:22), the body with many members ( Luke 22:19–20; John 16:9–11), the bride of Christ (Matt 5:31–32), the body of Christ ( 1 John 1:9) and list continues; hence, this resonates with the fact that the church has life vital processes that enable her to exist as the person individually. Collectively comprising of individual member is called “Ekklesia,” the “Called Out Ones.” That’s being said, the church is not the building; instead, the church comprises of people who have experienced salvation. Understanding that believers are stewards of God by virtue of their placements in the kingdom of God, reveals the church collectively as the steward of God placed among the community of nations to reveal God to the dying world via the proclamation of the Gospel. Additionally, the church does so when she manages people’s lives, allows individual member to exercise his or her talents, accounts for the treasures entrusted to her via reporting to establish integrity, and makes wisely use of times God has given her to succeed in the ministry. In order for the church to influence these four fundamentals of biblical stewardship, proper administration should be established proactively and interactively to manage life plans, talents, treasures, and times. God has called and chosen the church collectively to discharge oikonomia’s duties; therefore, the church is held accountable before God and the people she leads as she conducts her affairs via church administration to address the stewardship problem. The church can manage life plans, talents, treasures, and times when she functions administratively. God has called the church and elected her to be the manager of people’s lives, talents, treasures, and times (Christian stewardship fundamentals).
Assignments/Reflective Questionnaires
These questions are designed to test the understanding of the trainee in this seminar; therefore, trainee is advised to respond to these questions timely in this teaching chartroom. The answer to the question should be placed in this chartroom with the trainee’s name not later than Tuesday next week. These questions covered the content in this section.
- Why church administration?
- What the church is not and what church is?
- What job’s title has church been given biblically?
- What are the four areas the church is called to manage?
The Facets of Church Administration
Policy Development
Policy is the accepted principle of action adopted or proposed by a government, party, business, or individual that guides the behavior of the societal members. It is necessary to develop policies that guide the behavior of organizational members especially for an emergent congregation that is in the stage of congregational development; on the contrary, most church ministries that exist where little education concerning the factors that influence organizational development is lacking; therefore, such church ministry does not have a written policy. Despite of the excellence of practical ministry seen or experienced among the congregations, these things like church by-law and constitution, or policies that relate to finance and music are lacking. Most ministries that operate as the grass root ministries despite of their longevity lack organization due to the lack of church administration. Most of these ministries remained on the emergence congregational level due to the lack of written policy that directs their practices thought they have the Spirit; however, they lack organization. Ministries of such are ministries that operate without financial records and other records relevant for reference how ministry operates. Such ministry lacks the stewardship capability and never grows to reach her God’s giving potentials. God does well in organization because He had ordained organization from the beginning. No ministry by-passes biblical stewardship and prospers. This is the spiritual law. Every ministry has a visionary; hence, the birth of the vision gives birth to mission. Mission directs how ministry functions; therefore, the lack of written policy embedded in the mission statement retards ministry’s advancement due to the lack of direction to function well. It is like operating the machine without the operational manual. The machine might get damaged or the operator might get injured. Policy development in the church ministry is the sustainable approach to keeping the church alive.
Scheduling Events
Scheduling is a plan for carrying out a process or procedure and giving lists of intended events and times. Scheduling events according to the listing based on the order of significance is crucial with reference to the season of planning. Every time events are scheduled, they are also planned. One does not schedule any events without purposely planning how they will be executed. The lack of scheduling is the lack of time management which is directly proportional to the lack of planning understanding that schedule is the budget for time management and the success of any events when they are properly scheduled and planned. Scheduling and planning go in hand with one another. All events with reference to Bible studies, Sunday school, conferences, evangelism, teaching seminars, and among others should be scheduled for their maximum use in the calendar of events for the ministry fiscal year; on the contrary, most ministries do not have calendar of events nor projected budget how ministry runs at the start of the year; therefore, leadership does not have plan goal specific for activity schedule and reference for money how the church run ministry’s programs. This lacks the essence of biblical stewardship. Similarly, finance should be scheduled as well for the ministry to know the targeted budget for the fiscal year. There should be the development of the Ministry Action Budget for the church fiscal year to know how she compensates the budget through fund raising programs. Money to be used for evangelism and mission should be projected in church fiscal year’s projected budget to know how much the church spends on mission for the fiscal year. Scheduling events such as financial spending is crucial to effective church administration to fund church programs. All events should be scheduled in the ministry for effectiveness and efficiency including the financial schedule called the budget.
Planning Events
Planning is one of the time management’s strategies; therefore, planning events in church administration is crucial to time management that goes with the event planning. Time is the sensitive factor when events should take place. Events should be planned to incorporate those things that are involved in events taking into consideration when planning the events because in the absence of the players, the event will not take place; therefore, events should be planned according to the availability of people who will be participating in the events. For example, when planning when evangelism should occur, one should know the availability of those who will be participating in the evangelism. Failure to check these things can result into poor planning of events. Events in the church should be planned timely according to the availability of the participants.
Workers’ Payroll Payment
Since the church is a non-profit entity, money raised from tithes and offerings, portions should be used to pay church workers for the services rendered as the mean of gratitude and empowerment according to the principle of the Scripture. This tells the church that money raised should be accounted for so that the church will know how she authorizes money to pay church workers and plan for future capital campaign to boost the Treasury department for sustainability so that money will always be available to compensate those areas; therefore, the need to establish the Financial Stewardship Ministry in the local church is warranted.
The Tenants of Church Administration
Why Church Administration? Church administration is necessary for organization, assessment, pre-planning, and specific goal-setting for the period under review as the church ministry is concerned. These above mentioned are called tenants of church administration.
Organization
Church administration defines organizational approach to how activities are conducted in the church. Organization is the arrangement of events in the church’s metrics according to the template designed to be adopted in the church’s culture. The development of policies, by-law and constitution, template for financial transactions, calendar of events for the church fiscal year, the development of church budget for the fiscal year, the opening of bank institution to tailor financial transaction, the giving of monthly financial report, assessing and developing new programs for ministry’s ventures, and among others show organizational approach to ministry. It is expedient for church to have activities; however, the activities carried out should be documented for assessment to determine future goal setting. How does the church know that it is necessary to have crusade in the event of the new church plant? It is by documenting how many people attended the crusade daily, how much offering was raised, how many people gave their lives to Jesus, and how many people joined the new church plant. After the average attendance is obtained, the average offering collected, the average souls saved recorded, and the number that joined the church, the church should know if the crusade is the best method to open a new church plant. Organization is the road map that directs the church what activities inclusive that drives the motivation of the church leadership and what direction to take next in leading the church.
Assessment
Assessment is the act of examining the practices of the church with reference to programs, finance, and mission. Programs, money raised and spent, and the obedience to mission should e examined quarterly or monthly through progress and financial reports. When the church documents these areas in the church, it strategically prepares the church to set goal for the following month when the church has evaluated her practices. The failure to assess is the failure to plan; hence, it means no direction at all. The church will do a lot to affect her community if she plans well. That’s being said, every church should report monthly to her congregation money raised and spent. The congregation should be informed about progress and financial monthly in order to legitimize biblical stewardship. The church as the collective body is the manager of God’s resources called money. Despite of treasure or money, other biblical stewardship areas such as life plans and talents should be managed including times, should also be given credence. Assessment is done when the church gives report monthly or quarterly.
Pre-Planning
After organization, follows assessment; then, follows planning. Planning is never possible when an assessment has not been conducted; therefore, pre-planning is the product of assessment conducted on previous programs, finance, or mission. Desire programs, financial decision taken, and the next church plant engagement are called pre-planning activities born as the result of assessment. The pre-planning decided by the church leadership after the assessment was conducted on the previous church activities gives birth to new programs; therefore, the goal of pre-planning is to develop new programs with various objectives attached to goals in order to achieve them.
Goal-Setting
The rationale of goal-setting is the result of aspiration of what the church wants to achieve within the specified time frame taking objectives into consideration how to get there. For example, the ministry planted a church in Kakata a month ago. Once the ministry has set a goal to have the church planted, she obtained a mission house primarily; then, it was followed by other activities such as prayer meetings, Bible studies, and construction of the tent church followed by the six day crusade. The church would not have been planted without goal-setting consciously or unconsciously based on the pre-planning activity carried out. What is the next plan of actions to achieve similar goal? What were the activities carried out to plant a new church in Kakata? What areas the church did well and did not do well? Goal should be set with objectives with time frame; in this light, goal should be simple, measurable, achievable, retrievable, and time bond. Example of the goal that carries the above characteristics is mentioned below: In the next twelve months, Praise Ministries International will plant a church in Kakata and Voinjama. The above goal is being set based on the organization, assessment, and pre-planning taking into consideration materials and logistics to do the job. To set better goal taking into consideration materials and logistics, these questions are recommended to be asked: Is the goal simple, achievable, measurable, retrievable, and time bond?
Assignments/Reflective Questionnaires
- What significance do the facets of church administration play in church growth and development?
- What roles do the tenants of church administration play in leadership’s decision to implementing new programs in the church? These questions covered the content in this section and should be answered not later than next week Sunday.
CHAPTER TWO:
INTRODUCTION TO CHURCH ACCOUNTING
Churches differ from businesses by reason of their existence for obvious reasons. A church focuses on activities that cater to her congregations and society; therefore, the church does not maximize profit; consequently, no one owns shares or interests of her property; in this regard, extra income should be regulated into the church’s mission and activities. One of the differences between churches and businesses is that churches are exempted from paying taxes while businesses do. Understanding that church is the non-profit that contributes to the community of nations to make the world a better place, government has chosen to disallow churches to pay taxes. Another difference is that businesses create income statements each quarter in order to assess the business, financial performances; on the contrary, churches write up a statement of activities. This includes revenues, expenses, and net assets. Since churches don’t operate with owner or owners, they usually produce a statement of financial position which shows the organization’s liabilities and assets on the quarterly balance sheet listing the equity. In this volume, the difference between church accounting and the accounting for the traditional business entity is delineated.
What Is Church Accounting?
The dichotomy between the concepts of church accounting to that of the business accountings for the profit making stems from fund accounting. Funding accounting focuses on accountability and stewardship instead of profitability. For profit entities, they have general ledger or a single self-balancing account while churches have multiple general ledgers. The general ledgers go by “funds.” Funds prompt organizations separate resources into different accounts to identify the uses of those resources as well as where they come from. Since churches are tax-exempt, they have to keep detailed records while bookkeeping.
Fund accounting gets complicated depending on organization’s needs. If the church is operating into the western world like the United States, FASB 117 and FIN 46 are the IRS resources that outline the needs of the church’s accounting system. What does fund accounting looks like? They can include: (1) unrestricted, temporarily restricted, and permanently restricted net assets, (2) designated funds, (3) ministries, (4) departments, (5) campaign, (6) etc. Ask this question as the church: Should the church know how much money she has set aside for ________? The blank could be filled using any of the above mentioned listing from 1 to 5. Some software programs mask funds as classes or categories; however, the methods used will make it difficult to find out how much the church has set aside at a given time despite of allowing the church to track how much money she has received and spent in a class or category. In the absence of the program software, the church can do it manually attaching funds to the above categories and monthly reporting according to her accounting or bookkeeping practices. Every church has her method of tracking funds raised and spent monthly for assessment to know her strengths and weaknesses with reference to financial matter. At Praise Ministries International, we have developed financial forms or templates how we track funds raised and spent to enable us give financial report quarterly or monthly. Understanding that church is the non-profitable business, money raised and spent should be tracked to see what direction the church is taking financially to attend to programs.
Church Accounting Best Practices
In the following paragraphs, the list of best practices for managing the church’s books helps demonstrate accountability and protect churches’ finances. If the church operates in the west like the United States, it is advisable that the church reads the IRS’s latest rules and regulations to supplement these best practices.
- Diversifying Financial Responsibility: Financial responsibility should be given to multiple people in order to create a layer of accountability among the church workers. People assigned responsibility should complete their assignments accordingly. If worker is in the habit of giving his or her assignment to another person constantly to complete, discrepancies should be checked in the numbers to avoid flaw in the financial practice.
- Executing a Code of Ethics: Policy should be developed to guide the internal control system with reference to check and balance in order to maintain transparency in the financial department of the church. Such policy could include Financial Policy regarding receiving money, spending money, disbursement of funds, and among others.
- Creating an Annual Budget: Annual budget for the church fiscal year should be developed at the start of every year. This budget can change; therefore, it is not necessary to worry about the budget. The budget should be written and approved by the responsible party in the church. Such budget includes the Ministry Action Budget (MAB) that sums up the various departmental budgets to run various church programs during the year.
- Understanding GAAP and IRS Requirement: GAAP stands for Generally Accepted Accounting Principles (GAAP); hence, they are guidelines that all accounting professionals should follow. It is imperative that financial professionals understand the current GAAP rules and any changes that happen throughout the years. Church operating in Africa need not to worry about GAAP standard since they are not allowed to account to the American government; however, they are encouraged to follow it.
- Creating Multi-Year Plan: Knowing where the church will be the next seven years, give informed decision to creating financial plan that spans multiple years, and ensures strategic growth. Planning ahead of time to inform church members about the financial plan, gains early support from membership.
- Managing Fund raising Expectation: It is expedient for the church to be realistic for fund raising plans using the past data to set goal. If the church plans to use new tools in fund raising, it is advisable to lower goal or expectation until the tool is used.
Specialized Services for Church Accounting
- Outsourcing: Churches usually have tight budgets with fewer staff members; therefore, a church has to fulfill multiple roles in the church; as the result, bookkeeping might get pushed aside while dealing with other responsibilities. In this regard, it is necessary to hire someone who does bookkeeping and payroll.
- Outsourcing Bookkeeping: When it comes to filing with the Internal Revenue Services, IRS, churches can often have some of the complicated returns. This is due to the rules regarding revenues and expenses for 501 (c) (3) organizations; therefore, money that enters the church through donations should reflect on the organization’s tax forms if the organization is eligible to file taxes. Outsource booking can help the church handles these tasks while offering advice on changing tax requirements and codes.
Assignments/Reflective Questionnaires
- What is the difference between the church and the traditional business?
- What makes fund accounting difference from the traditional accounting system?
- What is the name of the document that churches are required to use in recording their financial transaction?
- What is the name of the document that churches are required to use when giving financial position or report?
- Amongst the best accounting practices, what practice or practices has/have your church adopted and used?
- Amongst the best accounting practices, what practice or practices would you adopt for your church today?
Accounting Terminologies
- Accounting: The action or process of keeping financial accounts. There is difference between accounting and bookkeeping. Bookkeeping is a direct record of all purchases and sales the business conducts, while accounting is a subjective look at what that data mean for the business. An accountant can be considered as a bookkeeper; however, the bookkeeper cannot be an accountant without proper certification as education or training is concerned.
- Bookkeeping: The activity or occupation of keeping records of the financial affairs of a business.
- Account: The record or statement of financial expenditure and receipts relating to a particular period or purpose. The ledger contains all the income and expense accounts.
- Equity: In finance, equity is ownership of assets that may have debts or other liabilities attached to them.
- Net worth: The total wealth of an individual, company, or household, taking into account of all financial assets and liabilities. Owner’s equity and net worth typically are used to mean the same thing. However, one difference is that owner’s equity more often defines that value of an individual’s investment in a business, whereas net worth refers to the overall book value of the company.
- Liabilities: The debt someone owes in financial obligations.
- Ledger: The book or other collection of financial accounts of the particular type or a page in the financial book naming such account.
- Balance Sheet: The statement of the assets, liabilities and capital of the business or other organization at a particular point in time, detailing the balance of income and expenditure over the receding period.
- Debit: The entry recording an amount owed, listed on the left-hand column of an account.
- Credit: The entry recording the sum received listed on the right-hand side of the column of an account.
- Account Receivable: Money owed to a company by its debtors.
- Account Payable: Money owed by a company to its creditors.
- Template: The pattern, model, or guide for the creation of some kind of projects.
CHAPTER THREE:
LEDGER DOUBLE-ENTRY ACCOUNTING BOOKKEEPING
In most business entries each class of transaction and their associated assets and liabilities are given their own accounts. For example, there will be no separate accounts for sales, purchases, rents, and liabilities to pay suppliers (payable, receivable etc.). There is no rule as to how many accounts an entity should have but the system should facilitate effective and efficient accounting and control. Each account in the system or book is referred to as a ledger. The general ledger contains the account used to sort and store a company’s transactions. The general ledger is organized so that the accounts will appear in the following order: Balance sheet accounts: assets, liabilities, and stockholder’s equity. In the church’s situation, assets for church ministry include offerings, tithes, building funds, mission funds, capital campaign, donations, contributions , pledges, wows, seed faith etc; therefore, these accounts represent sales in the business world since sales bring income as the above mentioned accounts do. These accounts are placed under credit during remuneration or when assigning figures to them in the account ledger. On the other hand, accounts that define liabilities include rents, medicals, transportations, mission initiatives, feedings, purchase of stationery, or evangelism seminars. These accounts are placed under debit when it comes to remuneration or when assigning figures to them. Double-entry bookkeeping involves the entries of debits and credits on the left and right sides of the account ledger respectively. Below are the sample ledgers restricted to ministry’s setting (Ledgers #1 and #2).
PRAISE MINISTRIES INTERNATIONAL
Police Academy Road
Monrovia, Liberia
LEDGER #1
| DATE | DESCRIPTIONS | DEBIT | CREDIT |
3/9/2022 | Income/Credit Offerings | $400.00 | |
| 3/9/2022 | Tithes | $600.00 | |
| 3/9/2022 | Donations | $900.00 | |
| 3/9/2022 | Building Funds | $300.00 | |
| 3/9/2022 | Mission Funds | $300.00 | |
| 3/9/2022 | Evangelism and Church Planting | $100.00 | |
| Liabilities/Debit | |||
| 3/10/2022 | Medicals | $100.00 | |
| 3/10/2022 | Transportations | $100.00 | |
| 3/11/2022 | Constructions | $900.00 | |
| 3/11/2022 | Mission | $50.00 | |
| 3/11/2022 | Evangelism and Church Planting Supports | $100.00 | |
| 3/11/2022 | Housing | $100.00 | |
| 3/11/2022 | Feedings | $100.00 | |
| Subtotal | |||
| -$1,150.00 | |||
Debit=Credit
Total Debit Total Credit
Note: In the above ledger, the total money raised for the month is $2,600.00 while the total money spent is $1,450.00. The difference between money raised (credited) and money spent (debited) is $1,150.00. To balance the book or the ledger, the difference must be subtracted from the income (credit); therefore, the money spent should be equal to the money raised; hence, debit should be equal to credit. The incomes or credits are placed under Credit (CR) while the liabilities or debits are placed under Debit (DR) as indicated in the above ledger #1.
PRAISE MINISTRIES INTERNATIONAL
Police Academy Road
Monrovia, Liberia
LEDGER #2
| DATE | DESCRIPTIONS | DEBIT | CREDIT |
| 3/9/2022 | Income/Credit Balance Forwarded | 1,150.00 | |
| 3/9/2022 | Tithes | $600.00 | |
| 3/9/2022 | Donations | $900.00 | |
| 3/9/2022 | Building Funds | $300.00 | |
| 3/9/2022 | Mission Funds | $300.00 | |
| 3/9/2022 | Evangelism and Church Planting | $100.00 | |
| Liabilities/Debit | |||
| 3/10/2022 | Medicals | $100.00 | |
| 3/10/2022 | Transportations | $100.00 | |
| 3/11/2022 | Constructions | $900.00 | |
| 3/11/2022 | Mission | $50.00 | |
| 3/11/2022 | Evangelism and Church Planting Supports | $100.00 | |
| 3/11/2022 | Housing | $100.00 | |
| 3/11/2022 | Feedings | $100.00 | |
| Subtotal | $1,450.00 | $3,350.00 | |
| -$1,900.00 | |||
| $1,450.00 | $1,450.00 |
Note: Balance forwarded from ledger #1 to ledger #2 is $1,150.00. Refer to the ledger #2 under credit.
Note: In the above ledger, the total money raised for the month is $3,350.00 while the total money spent is $1,450.00. The difference between the money raised (credited) and money spent (debited) is $1,900.00. To balance the book or the ledger, the difference must be subtracted from the income (income); therefore, the money spent should be equal to the money raised; hence, debit should be equal to credit. The balance on ledger #1 in the amount of $1,150.00 was forwarded to ledger #2. See ledger #2 balance forwarded. The general ledger is the source where the business financial transactions of the company or organization are sorted and organized into the balance sheet to reflect the company over all business activities under the specific period of time. This balance sheet is the financial statement detailing the financial activities of the company including the company’s assets, liabilities, and equity.
Rules for Balancing the Ledger
A general ledger acts as the record of all of the accounts in a company and the transactions that take place in them. A ledger has an opening balance, the debit and credit sides, and the closing balance in the business transaction of sales and expenditures in the traditional business. Balancing the ledger involves subtracting the total number of debits from the total number of credits. In order to calculate credits and debits, a few rules must first be understood. The rule involves:
- Subtracting the total debits from the total credits;
- All debit accounts should be entered on the left side of the ledger while all credits accounts should be entered on the right side of the ledger;
- For the general ledger to be balanced, credit and debit must be equal;
- Debits increase asset, expense, and dividend accounts, while credits decrease them;
- Credits increase liabilities, revenues, and equity accounts while debits decrease them. This may appear to be complex; nevertheless, it will appear simple as the lesson progresses while calculating credit and debit to balance the ledger.
Calculating the Balance Sheet
A balance sheet is the statement of financial position or report obtained quarterly or monthly to reflect the church’s financial activities during the period under review. The balance sheet is produced from the general ledger, which details the financial activities of the church in the summary form. It is called the financial report. To produce the balance sheet, enter all debit accounts on the left side and all credit accounts on the right side of the balance sheet. Include the balance for each. Consider which debit account each transaction imparts and whether it ultimately increases or decreases that account. For example, does it decrease inventory or does it increase cash? Conclusively, calculate the balance for each account and update the balance sheet. Below is the example of the balance sheet produced from ledger #1.
PRAISE MINISTRIES INTERNATIONAL
Police Academy Road
Monrovia, Liberia
STATEMENT OF FINANCIAL POSITION AS OF MARCH 2022
Current Assets:
Offerings $400.00
Tithes $600.00
Donations $900.00
Building Funds $300.00
Mission Funds $300.00
Evangelism and Church Planting Funds $100.00
_____________________________________________________________________________
Total Assets: $2,600.00
______________________________________________________________________________
Current Liabilities:
______________________________________________________________________________
Medicals $100.00
Transportations $100.00
Constructions $900.00
Mission $50.00
Evangelism and Church Planting Supports $100.00
Housings $100.00
Feedings $100.00
______________________________________________________________________________
Total Liabilities: $1,450.00
______________________________________________________________________________
Equity=Assets–Liabilities
Equity=2,600.00–1,450.00
Equity=$1,150.00
Note: In the above balance sheet, the amount obtained from the general ledger raised from collections is $2,600.00 while the amount spent is $1,450.00. Subtracting debit from credit, this amount was obtained which refers to equity. Equity is the difference between assets and liabilities, which represents the amount of capital invested by the owner of the company for the traditional business for profitability; on the contrary, the church does not maximize profit; therefore, the church’s equity is slight different from the profitable business since the church is the non-profit business.
The Balance Sheet
The balance sheet is the statement of the assets, liabilities, and capital of a business or organization at a particular point in time, detailing the balance of income and expenditure over the preceding period. It is also called the statement of financial position which serves as a snapshot in particular point in time, providing the most comprehensive picture of an organization’s financial situation. It reports an organization’s assets (what is owned) and liabilities (what is owed). The net assets (also called equity, capital, retained earnings, or fund balance) represent the sum of all annual surpluses or deficits. The balance sheet also indicates an organization’s liquidity by communicating how much cash an organization has at present and what assets will soon be available in the form of cash. The balance sheet is usually produced from the general ledger where transaction has occurred. The balance sheet is the financial statement given quarterly or monthly as the snapshot of the of the organization’s financial situations.
CHAPTER FOUR:
CASE APPLICATION OF DOUBLE-ENTRY LEDGER ACCOUNTING
BOOKKEEPING
Assignment/Case Study
At Praise Ministries International, Kiaffa Township, the following collections were carried out and expenses made on the following dates. On March 6, 2022 offering and tithes raised were $300.00 and $400.00. On March 11, 2022 offering and tithes raised were $200.00 and $700.00. On March 20, 2022 offering and tithes raised were $400.00 and $500.00. On March 27, 2022 offering and tithes raised were $600.00 and $500.00 respectively. On March 6, 2022, $300.00 was used for transportation while on March 11, 2022, $200.00 was used for refreshment and on March 20, 2022, $100.00 was used to buy light bulbs. (a). Using this information, produce the general ledger and the balance sheet for this transaction showing the comprehensive report that indicates the church’s assets, liabilities, and equity. (b). Using the second ledger with balance forwarded after the ledger ONE and balance sheet ONE was closed and updated, produce ledger TWO and balance sheet TWO showing the balance forwarded from ledger ONE.
KIAFFA TOWNSHIP PRAISE MINISTRIES INTERNATIONAL
MARGIBI COUNTY, LIBERIA
GENERAL LEDGER ACCOUNT ONE
| DATE | DESCRIPTIONS | DEBIT | CREDIT |
| 03/06/2022 | Offering | $300.00 | |
| 03/06/2022 | Tithes | $400.00 | |
| 03/06/2022 | Transportation | $300.00 | |
| 03/11/2022 | Offering | $200.00 | |
| 03/11/2022 | Tithes | $700.00 | |
| 03/11/2022 | Refreshment | $200.00 | |
| 03/20/2022 | Offering | $400.00 | |
| 03/20/2022 | Tithes | $500.00 | |
| 03/20/2022 | Light bulbs | $100.00 | |
| 03/27/2022 | Offering | $600.00 | |
| 03/27/2022 | Tithes | $500.00 | |
| SUBTOTAL | $600.00 | $3,600.00 | |
| Balance Forwarded: | $3,000.00 | ||
| $600.00 | $600.00 | ||
Ledger is balanced and updated here. Balanced forwarded is $3000.00
KIAFFA TOWNSHIP PRAISE MINISTRIES INTERNATIONAL
MARGIBI COUNTY, LIBERIA
STATEMENT OF FINANCIAL POSTION FOR THE MONTH OF MARCH 2022
| CATEGORY | DEBIT | CREDIT |
| Current Assets: OfferingTithes Total Assets: | $1,500.00 $2,100.00 $3,600.00 | |
| Current Liabilities: TransportationRefreshmentLight bulbs Total Liabilities: Equity/Balanced Forwarded: | $300.00 $200.00 $100.00 $600.00 | $3000.00 |
| Balance Sheet ONE |
KIAFFA TOWNSHIP PRAISE MINISTRIES INTERNATIONAL
MARGIBI COUNTY, LIBERIA
GENERAL LEDGER ACCOUNT TWO
| DATE | DESCRIPTIONS | DEBIT | CREDIT |
| 04/06/2022 | $3000.00 $200.00 | ||
| 04/06/2022 | Tithes | $300.00 | |
| 04/06/2022 | Transportation | $500.00 | |
| 04/11/2022 | Offering | $100.00 | |
| 04/11/2022 | Tithes | $800.00 | |
| 04/11/2022 | Refreshment | $300.00 | |
| 04/20/2022 | Offering | $400.00 | |
| 04/20/2022 | Tithes | $700.00 | |
| 04/20/2022 | Light bulbs | $200.00 | |
| 04/27/2022 | Offering | $200.00 | |
| 04/27/2022 | Tithes | $400.00 | |
| SUBTOTAL | $1000.00 | $6,100.00 | |
| Balance Forwarded: | $5,100.00 | ||
| $1000.00 | |||
Ledger is balanced.
Balance forwarded on this ledger is $5,100.00.
KIAFFA TOWNSHIP PRAISE MINISTRIES INTERNATIONAL
MARGIBI COUNTY, LIBERIA
STATEMENT OF FINANCIAL POSTION FOR THE MONTH OF APRIL 2022
| CATEGORY | DEBIT | CREDIT |
| Current Assets: OfferingTithes Total Assets: | $900.00 $2,200.00 $3,100.00 | |
| Current Liabilities: TransportationRefreshmentLight bulbs Total Liabilities: Equity/Balanced Forwarded: | $500.00 $300.00 $200.00 $1000.00 | $2,100.00 |
| Balance Sheet TWO |
Account Summary On Kiaffa Township Case Study
In the month of March 2022, Kiaffa Township at PMI raised the total offering of $.1,500.00 tithes $2,100.00 with total collection of $3,600.00 as indicated on balance sheet ONE. From the total collection, the church spent $600.00 on transportation, refreshment, and light bulbs respectively. The balance forwarded after the expenditure is $3000.00. This is referenced in the opening balance of April 2022. From ledger ONE and Balance sheet ONE, ledger TWO and balance sheet TWO are created using the opening balance from ledger ONE and balance sheet ONE for the month of April 2022 as indicated above. On ledger TWO, the total offering collected is $900.00, total tithe is $2,200.00 while the total expenditure made on transportation, refreshment, and light bulbs is $1000.00 and balance forwarded on sheet TWO is $2,100.00 after expenditure in the month of April 2022. The $2,100.00 is the closing balance for ledger TWO and balance Sheet TWO which becomes the opening balance for ledger THREE and balance sheet THREE. This is what goes on continually when recording financial transaction in the general ledger and making periodic financial position or report quarterly or month in the church. From the case study of Kiaffa Township financial transaction, these figures have been obtained for the months of March and April 2022 assuming that these transactions have occurred in the church.
CHAPTER FIVE:
REPORTING, DOCUMENTATIONS, AND BANKING
Reporting Financial Transactions
In reporting financial transaction for best practices, three methodologies have been recommended for financial transaction best practices at Praise Ministries International. The Financial Committee is recommended to adopt these practices in order to enhance efficient, effective, transparent, and check and balance financial transactions in the church; meanwhile, adopting them requires administrative discipline. These methodologies include template, ledger, and balance sheet approaches.
Template Methodology
Tracking: The template is the model or the pattern designed to track project activities in the field of disciplines or at institutions. At Praise Ministries International, templates or financial forms have been produced to help the Financial Committee track daily financial transactions on these forms or templates. The forms or templates should be used to record weekly transactions and then later be transferred on to the general ledger for feasibility. Collections made on offerings, tithes, and other donations should be recorded on these forms or templates to enable the Financial Secretary transfer the information onto the general ledger. The failure to track these transactions weekly is the failure to record the information into the ledger; therefore, cautious discipline measure should be put into the place by the Financial Committee to make sure that these transactions are conducted without missing any. Responsible individual should be present at all times to record these transactions so that document submitted will have integrity.
Ledger Methodology
In double-entry accounting bookkeeping, the general ledger contains the opening balance, debit, credit, and closing balance while debit and credit are placed on the left and right sides of the ledger respectively. The credit is the income the business entity receives from sales while the debit is the expenditure the business has used or owed in purchasing goods or services to serve her customers. In the church’s setting, tithes, offerings, and donations represent sales in the business world understanding that church is the non-profit business entity; therefore, in the general ledger, offerings, tithes, and donations made to the church should be recorded under credit to reflect incomes. Expenditures made on purchasing of materials, evangelism, and church planting that express expenditure should be recorded under debit in the general ledger. To keep the general ledger cleaned, it is recommended the Financial Committee uses the templates to track weekly financial transaction; then, the template should be used to summarize the information and then enter into the general ledger according to category or classification. Offerings, tithes, and donations should be added to reflect a whole. For example, offerings collected on the first, second, third, and fourth Sunday should be added and the total placed under credit in the general ledger to reflect the total offerings collected during the mouth. The same should be done with the expenses as well. That’s being said, the information recorded on the template or financial forms enables the Financial Committee to fill the general account ledger. The failure to adopt the template methodology is the failure to adopt the ledger methodology; therefore, the Financial Committee should be disciplined to task in order to give financial report at the closure of the ledger before the prior period under review.
Balance Sheet Methodology
The balance sheet is the statement of financial position used to give quarterly or monthly financial report. It contains assets, liabilities, and equity for the business. At the end of the quarter or month, the information from the general ledger is placed on the balance sheet to reflect the church current’s assets, liabilities, and equity while working with the recently raised incomes and expensed expenditures under credit and debit respectively to give the statement of financial position or financial report for the church. The information from the general ledger on the church’s assets after previous quarter or month is transferred or forwarded on the balance sheet under credit in order to update the sheet. At the close of every quarter or month, the general ledger and the balance sheet are balanced and updated to start new general ledger entries for the following quarter or month. In balancing the balance sheet, debit must be equal to credit.
Documentation and Filing
Documentation is the act of making documents accessible to the public while filling is the act of organizing and arranging documents in a systematized order according to office procedures. When church leadership makes accessible financial and progress reports to the congregation quarterly or monthly, the leadership exhibits documentation for transparency and accountability for check and balance in the financial control system and therefore fulfills biblical stewardship in Christendom. When the leadership organizes and arranges documents according to systematized order, the leadership files the church document. In the filing systems, documents should be organized and arranged according to classifications and labeled accordingly. Financial records, bank records, incoming and outgoing communications (letters) and among others should be organized, arranged, and filed according to methodology the church’s culture has chosen based on office procedures. Purchases made on ministry’s materials such as on construction, material items bought, and transaction from oversea, receipts, and reference numbers should be filed with the appropriate documentations for easy accessibility in the financial records. It is recommended that documents be filed into folders using alphabetical orders in file arrangement systems. The Administrator or the responsible individual should be knowledgeable and creative in developing the documentation filling systems using the chosen office procedures the chosen or the individual has elected to use; therefore, administration is not stagnant. In the church’s setting, the common terminologies used include tithing, offering, evangelism, mission, church planting, donations, pledges, vows, seed faith, Bible study, Sunday school, and the list continues. On the chosen folders, it is recommended that alphabets be used on the folders to indicate the category of records in such folders. All files containing records that relate to evangelism, mission, tithes, offerings, and among others should be marked E, M, T and O respectively and arranged in alphabetical orders. This helps in easy sorting and accessibility of documents that relate to the various categories; therefore, it is recommended for adoption in the church’s office. It is recommended that in the filing systems that document be arranged in alphabetical orders.
Budgeting
Budgeting is the act of planning finance wherein money is attached to items in the group in order to compensate them monetarily. Since budgeting is the planning of finance; therefore, it is recommended that budget be planned and developed to compensate ministry’s ventures. The development of budget helps the organization to develop capital campaign because the organization will have gotten what she is required to fund the budget for. Operating ministry in the absence of the budget is the lack of planning of finance to fund the various programs in the church; therefore, it is recommended that budget be projected at start of the fiscal year coupled the development of the calendar of events since those events require money before they materialize.
Banking
Understanding that church is a non for profit business, money raised should be deposited into a designated financial institution (bank) to institute ledger accounting approach. Under no circumstances should the church money be kept by an individual in the house expect there is no banking institution in the area like the villages or towns far away from the city limit. Depositing church’s funds into the bank establishes the general ledger accounting system, protects church’s funds from thieves, and puts into place check and balance in the financial control systems with reference to withdrawal of funds. At Praise Ministries International, we have established the financial policy regarding the institution of bank’s account, deposit of church’s funds into the bank, and withdrawal of church’s funds using the appropriate financial procedures. Money deposited into the bank should concord with the church accounting bookkeeping when it comes to church’s assets, liabilities, and equity; therefore, banking is necessary to also keep the financial institution in check.
CONCLUSION
The subject of Church Administration in some church’s settings has not been studied; therefore, the issue of practice is impractical; consequently, churches are operating blindly in the absence of accountability, transparency, and check and balance in the areas of policy developments, implementations, records keeping, and the lack of accountability with reference to financial stewardship. Based on the above mentioned areas, this piece of works has been produced to educate church’s workers to overcome these problems in Church Administration.
APPENDIX:
Name Of Templates
The below listed templates or financial forms are available in hard copies or the church’s websites printable to be used:
- Requisition Forms/Slips
- Weekly Financial Intake/Attendance
- Petit Cash Vouchers
- Master Transaction Control Sheet
- Financial Intake Form
- Weekly Financial Expenditure Form
- Monthly Attendance Record Form
- Monthly Cash Flow Statement/Balance Sheet
- Monthly Report Summary Attendance and Income Form
- Operational Expense Report Form
- Monthly Summary Operational Expense Reporting Form
- Etc.
Note: These forms can be obtained from the Pastor or at www.praiseministriesinternational.com under the Tab Simple Form or Financial Document.
Financial Stewardship Covenant Contract With God
Note: This document should be signed by the Pastor-In-Charge along with the responsible parties mentioned in this CONTRACT.
After having been trained and studied Church Administration, we as the Ministries at PMI have agreed to practice financial stewardship according to the word of God with reference to reporting as revealed in this training manual.
SIGNATORIES:
Name of the Pastor In-Charge: 1.__________________________/Signature:_____________________Date:_____________
Name of the Financial Secretary In-Charge:
2.____________________________/Signatuare:___________________Date:_____________
Name of the Treasurer In-Charge:
3._____________________________/Signatue:____________________Date:_____________
BIBLIOGRAPHY
Crawford, Hillary & Grigg, Billie Anne. “What is Double-Entry Accounting,?” No Pages, https://www.nerdwallet.com
Harmon, Clay. “The Ultimate Guide to Church Accounting,” No Pages, https://www.aplos.com
PRAISE MINISTRIES INTERNATIONAL 