Church accounting basics: tithes, offerings and the annual report

The money a church holds is entrusted, not owned. People who tithe or give to missions trust that the gift will go where they meant it to, and orderly books are how a church honors that trust. You don't need a complicated system, just a consistent one.

• Transparency: members should be able to see where the money came from and where it went.
• Protection: clear records and two-person controls shield the treasurer from suspicion and catch honest mistakes.
• Obligations: your governing documents say who keeps the books and who approves them; your legal form and tax status may add rules.

These are two separate questions: when you record a transaction (cash or accrual basis) and how you record it (single or double-entry). They are independent: many churches keep double-entry books on a cash basis.

When a cash book is enough. One bank account, a little cash, few transactions, no restricted funds and no bills to track: a well-kept spreadsheet does the job, with a date, description, amount, category and receipt reference on every line.

When you need double-entry. Several accounts, restricted funds, a mortgage, payroll, bills paid on terms, or a balance sheet to produce. It shows what is in every account and fund at any moment, and a typo shows up because the books won't balance. No theory required: "income of 385.50, Offerings, into the bank account" already is the full entry.

Fund accounting means tracking money by purpose, not just by account. Churches usually deal with three kinds of money:

• Unrestricted: general tithes and offerings the church can use for any part of its ministry.
• Restricted: gifts for a stated purpose, such as missions or a building project. What is given for a purpose is spent on that purpose.
• Board-designated: unrestricted money the board sets aside, like a roof reserve, which it can later release.

US nonprofit statements call these net assets "with donor restrictions" and "without donor restrictions." In practice:

• Give each restricted fund its own income account (4030, 4040) and, if useful, a matching expense account (5040 Missions support).
• Don't "borrow" from the building fund for running costs without an explicit decision and a plan to repay.
• Changing a fund's purpose takes a formal decision, shared with the people who gave.

The chart of accounts is the list of categories every transaction goes into. Keep it short: twenty accounts used consistently beat eighty used at random. Here is a proven starting point, grouped by type: 1xxx assets, 2xxx liabilities, 3xxx net assets, 4xxx income, 5xxx expenses.

• Need more detail? Add a sub-account (Utilities → electricity, gas) rather than a new top-level account; a second bank account becomes 1020.
• Don't renumber mid-year: comparing with last year is one of the most useful things you can show members.

Counting is the most sensitive moment, because the money is cash and not yet on record. Use the same routine every week.

1. 1

   Count with two people, right after the service

   Two appointed counters, not related to each other and on a rotation, count the plate and envelopes together. The treasurer never counts alone.

2. 2

   Sort by purpose

   Keep tithes (named envelopes), loose offerings and designated gifts, such as missions, apart. Note the name and amount on each envelope and check.

3. 3

   Sign the count sheet

   Write totals by denomination and by purpose on a count sheet (template below), signed by both counters.

4. 4

   Deposit promptly

   Until then, keep the money in a safe or a sealed, signed bag. Attach the deposit slip to the count sheet.

5. 5

   Record the entry

   One income line per purpose against the bank account, or cash on hand if not yet deposited, with the count sheet number as the reference.

6. 6

   Link gifts to givers

   Post named gifts to each giver's record for year-end statements, and keep them confidential.

A worked example. Sunday's count is $1,245.50: $800.00 in tithe envelopes, $385.50 in loose offerings and $60.00 for missions, deposited on Monday. In double-entry:

If the cash waits in the safe, use 1000 Cash on hand instead of 1010, then record Debit 1010 Bank account / Credit 1000 Cash on hand when you deposit it. In a cash book, the same Sunday is three income lines with one reference.

Every payment should show who approved it, what it was for and where the receipt is. The board approves recurring costs once; one-off purchases, case by case.

• Pay by traceable means: transfer, check or church card rather than cash.
• Attach the receipt to the entry: a photo or PDF saves a year-end hunt.
• Run petty cash on a fixed float: cash plus receipts always equals the starting amount.
• Record benevolence (5060) with a reference that protects the person helped.

A bank reconciliation checks that account 1010 matches the bank statement. Done monthly, it takes half an hour; left to year end, it becomes a twelve-month hunt.

1. 1

   Get the statement

   Download the month's transactions and closing balance.

2. 2

   Tick off each line

   Match the bank's lines against your entries, one by one.

3. 3

   Record what is missing

   Fees, interest, direct debits and incoming transfers.

4. 4

   Explain what is left

   In writing: a deposit that cleared the next month, a check not yet cashed.

5. 5

   Sign and review

   The treasurer signs and a second person reviews. Count cash on hand against account 1000 too.

A yearly giving statement is good practice anywhere. Send it only to the giver: giving records reveal a person's church involvement.

United States. Under IRS rules, a donor can't deduct any single contribution of $250 or more without a contemporaneous written acknowledgment from the church. It states the amount of a cash gift (or describes donated property, without valuing it), says whether the church provided goods or services in return and, if so, gives a good-faith estimate of their value; if the donor received only intangible religious benefits, it can simply say so. One annual statement can cover several gifts, as long as the donor has it when they file (and by the return's due date). See IRS Publication 1771.

United Kingdom. If your church is recognized as a charity for tax purposes and a UK taxpayer gives with a Gift Aid declaration, the church can claim an extra 25p from HMRC for every £1 donated, provided the donor paid at least that much Income Tax or Capital Gains Tax that year. Link every declaration to the right giver. See Claim Gift Aid on GOV.UK.

Who prepares the report, by when and who approves it is set by your constitution or bylaws. Often the treasurer drafts it, the board reviews it and members approve it at the annual meeting. A clear report includes:

• Income and expenses by account, against last year and the budget.
• Opening and closing cash and bank balances, reconciled.
• The restricted-funds summary.
• Bills and commitments still open at year end.
• A short treasurer's note and, if your constitution requires one, the reviewer's report.

Build next year's budget from this year's actuals. Start from what each account really did, adjust for known changes (a rent increase, a missions pledge), keep income assumptions cautious and present the budget alongside the annual report. During the year, compare actuals with the budget at board meetings. Share both documents a few days before the meeting and record the approval in the minutes.

In a small church a few people do everything. Internal controls aren't distrust: they let those who serve show that everything was done right.

• Separate duties: whoever counts doesn't record alone; whoever approves a payment doesn't also make and record it alone.
• Two signatures, or dual approval in online banking, above a limit the board sets.
• Every count by two people, with rotating counters.
• Limited access to bank logins and named giving records.
• Monthly reconciliation reviewed by someone who doesn't keep the books.
• An annual review: if your constitution has no auditor or examiner, ask two capable people outside the finance team to check the records.
• Never mix personal and church money, not even "for a few days."

An offering count sheet to print for every count and file with the records:

OFFERING COUNT SHEET

Church: [CHURCH NAME]
Date: [MM/DD/YYYY]     Service or meeting: [e.g. Sunday 10:30 am service]
Count sheet no.: [SEQUENTIAL NUMBER]

1. CURRENCY AND COIN
   Bills: 100   qty ____  x 100.00 = ________
   Bills: 50    qty ____  x  50.00 = ________
   Bills: 20    qty ____  x  20.00 = ________
   Bills: 10    qty ____  x  10.00 = ________
   Bills: 5     qty ____  x   5.00 = ________
   Bills: 1     qty ____  x   1.00 = ________
   Coins                           = ________
   TOTAL CASH (A)                    ________

2. CHECKS (check no., name, amount)
   ______________________________________  ________
   ______________________________________  ________
   TOTAL CHECKS (B)                        ________

3. TOTAL BY PURPOSE
   Tithes (named envelopes)                ________
   Loose offerings                         ________
   Missions                                ________
   Building fund                           ________
   Other: [SPECIFY]                        ________
   GRAND TOTAL (must equal A + B)          ________

4. NAMED GIFTS (attach a list if needed)
   Name                            Purpose            Amount
   ______________________________  _______________    ________
   ______________________________  _______________    ________
   ______________________________  _______________    ________

5. CUSTODY AND DEPOSIT
   Held in: [safe / sealed bag no. ____]
   Deposited on: [MM/DD/YYYY]    Amount deposited: ________
   Deposit slip no.: [NUMBER]

Counted by (name and signature): __________________________________
Counted by (name and signature): __________________________________
Recorded in the books on: [MM/DD/YYYY]  by: ______________________

Notes (differences, suspect bills, other):
__________________________________________________________________

The Assemblea finance module follows the method in this guide without asking you to learn accounting first.

• It is double-entry under the hood, with a Simple mode: pick Income or Expense, the amount, the account and cash or bank, and it writes the balanced entry for you. Switch to full double-entry when you need it.
• On first use it creates the church chart of accounts above, in your church's language, ready to adapt with sub-accounts.
• Each income line can be linked to the donor, so the gift shows on the member's record and in the print-ready annual giving statement, which includes online and manually recorded gifts.
• Attach receipts to entries, and get a trial balance, income statement, balance sheet and yearly budget built in.
• Online giving through Stripe, including recurring gifts and funds or campaigns, posts into the books automatically.
• The module is included in the free plan too, up to 50 entries a year; Starter removes the limit.

It doesn't replace your accountant: there is no bank-feed sync, e-invoicing or tax filing. See pricing, or start with the free plan.