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On Financial Suite reports, all accounts are grouped by account type. A Balance Sheet Report contains Assets, Liabilities, Fund Principals, and Restricted accounts. Income/Expense reports or ACS Analysis of Revenue reports can contain accounts such as Revenues, Expenses, and other revenue and other expenses.

There are two basic categories of accounts: permanent and temporary.

  • Permanent accounts have a balance that carries from one fiscal year to the next. Assets, liabilities, and restricted funds are examples of permanent accounts.
  • Temporary accounts apply only to the current fiscal year. At the end of the year, the balance is transferred to a Fund Principal account. The Fund Principal account is also known as the closing account or owner's equity account. Revenues and expenses are examples of temporary accounts.

  Assets — A type of account for things of value owned.

  • Assets include cash, cash in the bank, land, savings, stock, bonds, investments, accounts receivable, equipment, promises from others to pay, or any other physical resource with value. Asset accounts carry a debit balance.
  • Land, buildings, tools, and supplies are called fixed assets and represent items typically held for more than a year that can be easily converted to cash.
  • Promises from others to pay the church or organization are often called receivables. These can include tuition commitments for a school.
  • Receivables, plus cash, stock, and other available assets are called current assets. They can typically be quickly converted to cash.

  Liabilities — A type of account for a debt or debt owed.

  • Liabilities include goods or services bought on credit or time. Liabilities are also commitments that are owed.
  • Loans from the bank are long term liabilities.
  • Bills from vendors for services rendered are often called payables.
  • Payments owed for payroll taxes, insurance benefits, etc. are also liabilities.
  • Income taxes withheld from employees’ paychecks are liabilities. Liability accounts carry a credit balance.

  Designated or Restricted Accounts — A type of account that represents special kinds of liabilities.

  • Money has been entrusted to the church for a specific purchase, such as a new building or a Youth Ministry.
  • Your organization must spend this money as specified or return it to the donor, unless some other arrangement is made.
  • GAAP require that you show Designated and Restricted accounts separately.
  • Restricted accounts carry a credit balance. Receipts post to restricted accounts as credits. Disbursements from a restricted account post as debits.
  • Restricted accounts are not revenue. They are liabilities in restricted accounts.
  • Temporary Restricted accounts could be used for a gift designated for a youth trip or memorial, while Permanent Restricted accounts could be used for endowments, from which only the interest on the principal can be used, not the principal itself.

  Fund Principal — The fund principal is the excess of assets over liabilities. It's also called the fund balance or fund equity, and it represents an organization's resources. The Fund Principal equals liabilities plus restricted funds.

  • Your organization’s resources are located in the fund principal. This fund principal is comparable to an owner’s equity in a business.
  • The Fund Principal is based on the following equation:

    [(Assets – Liabilities) – Restricted Accounts] + (Revenues – Expenses) = Fund Principal
  • The Fund Principal equals your assets minus liabilities and restricted accounts, plus revenue minus expense accounts.
  • At the end of the accounting cycle, all revenue and expense accounts, also called temporary accounts, close to a Fund Principal account.
  • Fund Principal Accounts must be located under the Fund Principal heading to print the balance sheet correctly. Although the Fund Principal is a main heading, it is also a liability. 

  Revenues — Revenues reflect amounts received by an organization in the form of contributions, donations, receivables, or something of value and other revenues the organization uses in its daily operations.

  • Revenues carry a credit balance.
  • Examples of revenue forms for a non-profit organization include offerings, tithes, and book sales.
  • Revenue Accounts are also called Income Accounts.

  Expenses — Expenses reflect the cost of operating, such as utilities, salaries, or postage.

  • Expenses carry a debit balance.
  • Examples of Expenses include utilities, wages, and maintenance expenses.
  • Expenses are the monetary measurement of resources the organization uses during a period of time for which cash or other compensation was given.

Quick Reference Chart

Account Type

Definition

Account Number Prefixes

Assets

What you own

1

Liabilities

What you owe

2

Fund Principal

Net worth

3

Revenues

Money coming in

4

Expenses

Money going out

5

Other Revenues

Non-budgeted revenues

6

Other Expenses

Non-budgeted expenses

7

Temporary Restricted

Net worth designated for a specific purpose

8

Permanent Restricted

Net worth that cannot be spent

9