Church Accounting
© 2014 Icon Systems Inc.
http://www.iconcmo.com
IconCMO Church Software
by Icon Systems Inc.
Church Accounting
© 2014 Icon Systems Inc.
All rights reserved. No parts of this work may be reproduced in any form or by any means - graphic, electronic, or
mechanical, including photocopying, recording, taping, or information storage and retrieval systems - without the
written permission of the publisher.
Products that are referred to in this document may be either trademarks and/or registered trademarks of the
respective owners.
While every precaution has been taken in the preparation of this document, the publisher and the author assume no
responsibility for errors or omissions, or for damages resulting from the use of information contained in this
document or from the use of programs and source code that may accompany it. In no event shall the publisher and
the author be liable for any loss of profit or any other commercial damage caused or alleged to have been caused
directly or indirectly by this document.
Printed: November 2014 in Moorhead, MN.
Publisher
Icon Systems, INC.
1100 32nd Avenue South
Suite G
Moorhead, MN 56560
Sales:
Phone: 1-800-596-4266
Email: [email protected]
Support:
Phone: 1-218-236-1899
Email: [email protected]
Web Site: http://www.iconcmo.com
4
Church Accounting
Table of Contents
Part I Introduction
5
1 Getting...................................................................................................................................
Started with Fund Accounting
5
2 Summarized
...................................................................................................................................
Instructions and Free E-book
5
3 Setup ...................................................................................................................................
the Organization's Information
6
4 Personal
...................................................................................................................................
Preferences
7
5 Accounting
...................................................................................................................................
Funds
8
6 Chart...................................................................................................................................
of Accounts (COA)
10
7 Entering
...................................................................................................................................
Vendors
12
8 Entering
...................................................................................................................................
Uncleared Transactions
13
Entering AP or..........................................................................................................................................................
Checks
13
Entering Credit
..........................................................................................................................................................
Card Payables
14
9 Entering
...................................................................................................................................
Items and Customers
14
10 Entering
...................................................................................................................................
AR Invoices
16
11 Entering
...................................................................................................................................
Beginning Balances
16
12 First Bank
...................................................................................................................................
Statement Reconcilation
17
© 2014 Icon Systems Inc.
Introduction
1
Introduction
1.1
Getting Started with Fund Accounting
5
*** The following document was written by Icon Systems, an accounting software company, on
how to start the IconCMO accounting module. It is the church’s responsibility along with their CPA
to interpret these instructions on the use of the software to get the desired results for the
church’s accounting books and ensure proper account set up. Proper account set up will impact
the type of information available, accuracy, tax reporting requirements, and the ease of use
within the software.***
1.2
Summarized Instructions and Free E-book
The following is a summarized version of how beginning balances are entered into the system.
These steps were added for convenience and in no way replace the detailed instructions in this
manual, which every church and their financial advisers should review before entering numbers
into the system.
1. Enter a beginning balance date of 12/30/2013 (Not 12/31) This is for an accounting system
startup date of 01/01/2014. The idea is that the beginning balances be set one day before the
checks are done in step 3. Please adjust if you are starting a system on a different day.
2. Enter the beginning balances. The total should match that of the bank statement dated 12/31.
In other words, you are setting the system up on 12/30 to what the bank says you have on
12/31. The church decides which funds hold the money. What's at the bank is indisputable as far
as a balance and must be the amount the church uses, regardless of what any other software (ie
Excel, Quickbooks, etc) says.
3. Next, anything that has not cleared the bank should be entered with a date of 12/31/2013. This
date captures anything that the bank does not know about - ie. uncleared checks. This is
important, as anything with a date before 12/30 will affect the beginning balance. Anything
entered after 12/31 will appear in the financials for 2014 records instead of 2013. We are using
the 12/30 date to match the bank, then we are inputting transactions (for 2013) on 12/31 to
match what the church's checkbook has that is uncleared through the bank. At this point, if you
run a balance sheet for 12/31, you should see the same numbers in IconCMO as in your
checkbook register at the church. Because this balance takes into consideration uncleared
checks, it will not match your bank statement. Only the 12/30 balance sheet will match your
bank statement.
4. Move your system to 2014 and enter in all the information for January, 2014.
5. When you get your first bank statement, go to Banking: Checkbooks: Reconcile. Set the
'Beginning Balance' to zero.
6. Set the ‘Deposits and Other Credits’ box equal to the deposits on the bank statement plus the
beginning balance on the bank statement. (‘Deposits and Other Credits’ = statement’s deposits
+ statements begin balance).
7. Enter the rest of the information as it appears on the bank statement like checks and other
debits, being very careful not to count things twice. For example, fees may be included in the
© 2014 Icon Systems Inc.
6
Church Accounting
debits, however you already put them in to the service charge field. The ending balance field
on the top line should match the ending balance on your bank statement. This is absolutely
essential. Then click the 'Save' button, which moves the statement to the bottom portion of the
window and can be selected for reconciliation.
8. When you click the 'Reconcile' button and check off all the reconciliation information, it should
match the totals in the second line of numbers. All transactions that have the 'BBal' journal type
in this window should be checked off in your first statement. If the reconcile balance remaining
is not zero, you are missing either a deposit or debit in the transactions or the balances entered
in the Fund Maintenance window are incorrect. Because accounting is perpetual, entering the
first statement correctly is critical to getting future statements to show correct beginning and
ending balances.
We highly recommend reading the free e-book on fund accounting to understand the fund
accounting concepts.
1.3
Setup the Organization's Information
Go to Organization - Setup - Information.
Select the ‘First Month in Fiscal Year’ from the drop-down. This is the first
month of your fiscal year. For example, if you are on a calendar year it would
be January. If your fiscal year goes from July to June then it would be July.
Enter the 'Beginning Balance Date'.
o If the fiscal year is Jan. to Dec. and you are beginning the system on Jan.
1st, 2014, then the date should be set to Dec. 30th, 2013. We want to leave
one day in the previous year (Dec. 31st) to input uncleared transactions
before the new year 2014 starts.
o If the fiscal year is July to June and you are beginning the system July 1st,
2013, then the date should be set to June 29th, 2013. We want to leave one
day in the previous year (June 30th) to input uncleared transactions before
the new year 2014 starts. In this scenario the fiscal year 2014 actually starts
on July 1st, 2013 and ends on June 30th 2014.
o Another scenario is starting the system somewhere mid year. For e.g., let's
say your fiscal year is Jan through Dec., but you're going to begin using this
system as of April 1st. In this case your beginning balance date would be
March 30th, 2013. Again, we want to leave one day in the previous month
(March 31st) to input uncleared transactions before the new month starts
on April 1st, 2013.
Next, select the 'Reversing Journal Type' (Reverse Journal, Zero Journal or
Delete Journal).
© 2014 Icon Systems Inc.
Introduction
7
Reverse Journal: This option leaves the original journal alone and
creates a new one, negating the entries of the original journal.
o Zero Journal: This option zeros the amount fields of the original
journal and adds a notation that the journal was reversed, who
reversed it, and the date it was reversed.
o Delete Journal (not recommended): This option physically
removes the original journal from the system and enters a
notation in the transaction log file. There will be no other audit
trail when this option is used with the exception that a journal
number will be missing, giving the assumption that it was deleted.
This is best used when first setting up the system where the user
may make mistakes and would like them removed, as to not
clutter up the accounting books. However, you should choose one
of the other two options after set up.
Click the 'Save' button. This screen is also where you input the church's name,
address, and other information that is used throughout the system. Please fill
out this information before clicking the 'Save' button.
o
1.4
Personal Preferences
Go to Organization - Preferences - Personal.
Set the ‘Fiscal Year to work with’ to the fiscal year that you will be entering in
the beginning balances for at this time.
Make sure 'View Accounting' is set to ‘YES’, then click the save button on the
bottom left of the screen when any of these are changed.
Note: When setting up the beginning balances, this should be set for the year
you are entering the balances in. Review the two examples below and adjust
the years accordingly for your situation.
© 2014 Icon Systems Inc.
8
Church Accounting
o
o
1.5
Fiscal year that is the same as the calendar year (Jan. to Dec.) - your fiscal
year should be set to the year prior that you want to start the system. If
you are starting in Jan. 1st, 2014, then the 'Fiscal year to work with' setting
should be 2013 while you enter in the beginning balance and uncleared
items. You would change this to 2014, however, before entering Jan 2014
transactions.
Fiscal year that is July to June - If you were planning to start the system in
July 2014, then you would set this fiscal year to 2013, as you will be
entering the beginning balances and uncleared transaction in the prior
month, June, which is part of the 2013 fiscal year. When you are ready to
enter in data for the 2014 year starting on July 1st, then change this setting
to 2014.
Accounting Funds
Go to General Ledger - Funds - Fund Maintenance
There are two different types of Funds that can be created in IconCMO.
Understanding the differences is essential to setting up the chart of accounts,
funds for contributions and funds for the accounting. It also helps to know
which side of the system that corrections are made as both sides work
independently of each other, within one system.
o Contribution Funds
Contribution Funds (C-Funds) are funds that people contribute
to. Contribution Statements are printed from information that
is posted to C-Funds and corrections to people's statement
must be made on the contribution side of the system.
Contribution Funds are entered through the Contribution
module in the Contribution - Management - Cont Maintenance
screen.
Some differences are: C-Funds go to zero each year, money is
not rolled over to the new year, they have pledges, and their
balance does not go up and down - only up as money is added.
o Accounting Funds
Accounting Funds (A-Funds) are funds that are defined by the
financial group in the church for the purpose of managing the
finances of the church. When a church's financial statement is
incorrect, the user will correct the transaction on the
accounting side of the system.
For e.g. in addition to the 'General Fund' (which is a required
fund) the board might have a Building Fund and a Charities
Fund.
Some differences are: A-Funds' balances roll forward, budgets
are put in for them, fund balances go up and down depending
on revenue and expenses, they do not zero each year.
The Fund Maintenance form is used to create accounting funds (A-Funds) and
enter beginning balances.
o Three different types of funds:
© 2014 Icon Systems Inc.
Introduction
9
Unrestricted
Restricted
Temporarily Restricted
o A separate 'Statement of Activities' (sometimes referred to as a
Profit and Loss statement) and a 'Statement of Financial
Position' (sometimes referred to as a Balance Sheet) can be run for
each fund defined as well as for all accounting funds combined.
Add a new fund:
o Enter the Fund Name.
o Select the Status and Fund Type.
o Press the Add button.
Fund names can be modified anytime.
A fund cannot be deleted once dollars have been posted to it, however, its
status can be set to 'Inactive'. Once the status is set to Inactive the fund will no
longer appear in any drop down boxes. The fund will appear in financial
reports provided activity had occurred during the date range specified.
Below is a conceptual illustration how funds work with the Chart of Accounts
(COA), with all of them under the authority of the organization. The funds
oversee the COA - not the other way around. For example, the checkbook is
not assigned to just one fund. It's the funds that keep track of how much
money each has within the checkbook. IconCMO runs reports at the fund level.
All funds share the same COA, therefore it is quite possible to have one
revenue account tracking the revenue for the Building, General, and Youth
Funds. The church would still know exactly how much revenue came into one
revenue account as reports are created based on each fund. Think of funds as
an additional layer of reporting.
© 2014 Icon Systems Inc.
10
1.6
Church Accounting
Chart of Accounts (COA)
Go to General-Ledger - GL - Chart of Accounts.
Use this form to view the chart of accounts, rename an account, delete unused
accounts, inactivate accounts, move an account or create new accounts.
The first time this window is opened, you will notice the existence of some
accounts even though you may not have entered any. These are the minimum
list of accounts which are required by the system and cannot be modified.
You will also be given an option to install a default chart of accounts. Accounts
that are not required, can be renamed or removed. This is indicated to the
right of the accounts under the 'rqd' column. If there is a 'N', that means it can
be modified. If it's a 'Y', it's a required account and can't be modified, however
sub-accounts can be created.
All accounts except Net Assets (Funds) are entered using this window. Funds
and their beginning balances are entered into the system using the Funds
Setup form located under 'General Ledger - Funds - Fund Setup'.
o Funds are the Net Asset accounts and can't be directly affected with
journal entries. The Net Assets (Funds) decrease or increase based on
transactions like writing a check for an expense item or entering in
revenue. In this process, you assign the transaction a fund that is affected,
therefore making its balance go up or down. Funds aren't to be confused
with the accounts for the debit and credit disbursements.
IconCMO has a single chart of accounts defined and every fund has access to
every account. For this reason we strongly recommend that account names be
© 2014 Icon Systems Inc.
Introduction
11
kept generic. For e.g. Office Supplies - General and Office Supplies – Youth
should be replaced with one account Office Supplies.
IconCMO allows for accounts to be defined up to three levels deep as shown
below with the account 'Pastors Car'. Accounts always show up in alphanumeric sequence within their level.
Each account belongs to an Account Type. The system breaks down the
accounts according to the acceptable accounting standard of - Assets,
Liabilities, Revenues, Cost of Sales, Expenditures, Other Revenues, Other
Expenditures and Other Financial Sources -Uses.
Add a New Account:
o Press the 'Add New Account' button.
o Select the Account Type (Assets, Liabilities, Revenue, and Expenditures
etc.).
o The sub-account drop down contains information based on what
selections were made from the first three drop down lists. Leave this field
set to 'Not a sub-account' if the account being added is a major account. If
the account is to be a sub-account of another account, then select its major
account from the drop down list.
o Press the 'Save' button to add the account to the system. Pressing the
'Clear' button clears the contents of the window and pressing the 'Close'
button returns you to the main COA window.
© 2014 Icon Systems Inc.
12
Church Accounting
Note on Checkbook types (important): If you need to write checks from an account or
reconcile it; although it's a saving, money market, or other type of asset account at the
bank, then you will want to enter these as a checkbook type in IconCMO. The checkbook
type is the *only* one that allows to write checks and reconcile, as it's treated as a
subsidiary ledger. If it is made as a saving account and later you realize you need to write
checks - you will not have this ability and you can't transfer the information from one
account to another.
1.7
Entering Vendors
Go to AP - AP Activities - Vendor List screen to enter your vendors.
Once vendors are entered, they can be used in the Accounts Payable (AP), Credit
Cards, Check Writing and in some cases Journal Entries. These modules share the
same vendor list and consolidates the vendor activity (AP - AP Activities - Vendor
Activity screen) on one screen, no matter where the transaction happened so
users can review vendor activity in one place.
To enter a vendor you simply fill in their name, address, and other information
and click save. This information can be modified at any time.
Note (Important): Churches may have to track 1099 information for vendors please refer to your CPA on the guidelines for this. If 1099s are needed, please
ensure the 'Track 1099' option is set to 'Yes' and click the 'Save' button.
The user can choose a 'Default Expense' for the vendor, if they use the same
expense each time, speeding up the input when writing checks.
© 2014 Icon Systems Inc.
Introduction
1.8
Entering Uncleared Transactions
1.8.1
Entering AP or Checks
13
Go to AP - AP Activities - Enter Bills.
o Only use AP if your organization uses Accrual based accounting. Otherwise put
uncleared items in the checkbook, which has a similar process to AP, but is
found at the Banking - Checkbooks - Check Writing screen . If you are unsure
which method to use (Accrual or Cash Basis), you should review the church's
bylaws or review the following website for a detailed explanation.
o In either case, you should be using the date of Dec. 31st if your fiscal year is
Jan. - Dec., or June 30th if you are a July to June fiscal year. Remember we are
reserving the one day before the system starts to enter in any uncleared
items. Depending on your fiscal year and beginning balance date (when you
are starting the system), these dates can change. However, it's important to
remember that the invoices should be entered on the day that was reserved
for uncleared checks (or other transactions) no matter when the invoice
actually came into the organization.
For example in an organization that is starting on Jan. 1st, 2014, with a
beginning balance date of 12/30/2013, but has an unclear transaction dated
12/22/2013 - the church would enter this transaction (either in banking check writing or AP - Enter Bills) with a date of 12/31/2013. The reason is to
ensure it's in the system, but one day after the beginning balance date of
12/30/2013. Please adjust depending on your unique situation.
o Enter invoices that have an outstanding balance as of the end of the
beginning balance date.
© 2014 Icon Systems Inc.
14
1.8.2
Church Accounting
Entering Credit Card Payables
Go to Banking - Credit Cards - Credit Card Charges to enter in any credit card
charges or credits that have not been paid and need to roll forward to the next
year. These should have a date of Dec. 31st when the church is starting the system
on Jan. 1st. Please adjust the date to your unique situation.
Use this form to enter credit card charges or credit memos made to a store or
vendor.
A credit card charge increases the Credit Card Payable (Credit Card) selected while
a credit memo reduces the Credit Card Payable account selected.
1.9
Entering Items and Customers
Before entering in AR invoices, the church must set up their items and
customer they wish to use for the invoice. Items are things like room rental for
$100, or Book Supplies for $40. Customers are simply the people that purchase
items or services from the church. Below there are three types - Service,
Memo, and Product. After choosing the appropriate one, fill in the rest of the
fields - Name & Description, Unit of measure, Taxable, Account Type, Account
Name and Price. Then click the 'Add' button.
o Product and Service items work the same, but exist for you to differentiate
between the two. When an item of type 'Memo' is selected, all fields will
be blanked out except the item name and the item description. When an
invoice is printed, only the description will be printed on the invoice - all
other information will not show.
© 2014 Icon Systems Inc.
Introduction
o
o
Taxable field - Set this field to Yes if the buyer should be taxed when
buying this item. The buyer will not be taxed if this is set to Yes, but the
customer is marked as tax exempt. When tax is applied it will be
calculated based on the tax code assigned to the customer. Consequently,
the item tax calculation could be different between two different
customers. In AR Reports, there is a report called 'Sales Tax Liability' that
will identify taxes collected based on the Sales Tax codes defined.
Account Type & Name is set to the account to be credited for this sale. This
setting has no significance for items of type Memo.
Entering customers is similar to entering vendors in AP, as seen below. Enter
the information for the name of the customer, address, and other contact
information. There is a notes area where you can keep a log of
communication. Additionally, applicable taxes and terms can be set up, that
will be applied to the customer.
© 2014 Icon Systems Inc.
15
16
1.10
Church Accounting
Entering AR Invoices
Go to AR - AR Activities - Invoices.
This section would be used to enter any outstanding receivable invoices.
Enter Items sold and Customers using - AR - AR Setup - Items, or Customer List.
Only those items that were sold and have not yet been paid for need to be
entered at this time.
Record unpaid invoices that need to come forward into the new year using the
Dec. 31st date if you are starting the system on Jan. 1st. Please adjust to your
unique situation if starting on a different day.
1.11
Entering Beginning Balances
Go to the General Ledger - Funds - Fund Maintenance screen.
Whatever accounting system you're coming from, there will probably be some
balances that exist for each fund that has some activity and you will want to
enter those balances into the system.
Usually, one will pick the end of an accounting period such as a month, quarter
or year to determine what those balances will be.
Because this is a fund accounting system, each fund will have a beginning
balance assuming its balance is not zero as of the ending period you choose.
o Select a fund from the drop down list. The funds were initially put in when
you read the Accounting Funds section of this manual.
o Press the button titled 'View-Enter Balances' .
Situation A
© 2014 Icon Systems Inc.
Introduction
o
1.12
You begin using IconCMO at the beginning of your Fiscal Year. For e.g.
Jan. 1st 2014, therefore, Dec. 31st, 2013 is that last day of your previous
fiscal year.
1. In this case there will be no revenue or expenses to enter
since these entries always begin a new year at zero.
2. Enter assets and liabilities as of Dec. 30th of the fiscal year.
Remember, we are keeping the 31st for uncleared items.
Situation B
You begin using the system in mid year.
1. In this case there will be revenue or expenses.
2. Use the end of month revenue and expense report from
your old system to enter ending balances. It should contain the
information for the year to date of all revenues and expenses.
Enter assets and liabilities into the edit box column titled 'Balance On Last
Day'. See below.
Beginning balances cannot be saved until debits equal credits.
o For e.g. If you enter $500 under assets and $300 Payroll liabilities,
then your net assets (Assets – Liabilities = Net Assets) will equal
$200.
The 'Net Asset' line is right after the last liability account. In
this example, it would have the $200 entry.
o The beginning balance window is the only form where you will
have access to the net asset account for a fund and should not be
changed once you move forward with the initial balances - ever.
o Press 'Save Beginning Balances' button and press 'Ok' to confirm
the balance for the appropriate date.
First Bank Statement Reconcilation
Reconciling the first bank statement.
© 2014 Icon Systems Inc.
17
18
Church Accounting
o
o
o
o
When you get your first bank statement, go to Banking: Checkbooks:
Reconcile. Set the 'Beginning Balance' to zero - seen above next to the
statement date field.
Set the ‘Deposits and Other Credits’ box equal to the deposits on the bank
statement plus the beginning balance on the bank statement - see the
white box in the red oval to the left. (‘Deposits and Other Credits’ =
statement’s deposits + statement's begin balance).
Enter the rest of the information as it appears on the bank statement like
checks and other debits, being very careful not to count things twice. For
example, fees may be included in the debits, however you already put
them in to the service charge field. The ending balance field on the top
line should match the ending balance on your bank statement. This is
absolutely essential. Then click the 'Save' button, which moves the
statement to the bottom portion of the window and can be selected for
reconciliation.
When you click the 'Reconcile' button and check off all the reconciliation
information, it should match the totals in the second line of numbers. All
transactions that have the 'BBal' journal type in this window should be
checked off in your first statement. If the reconcile balance remaining is
not zero - you are missing either a deposit, or debit in the transactions or
the balances entered in the Fund Maintenance window are incorrect.
If it's incorrect, the system will not be right going forward as
accounting is perpetual. The first statement is critical to have right and
for the future statements to have the right ending and beginning
balances.
An example using the numbers in the screen above the checkbook has a $1,100
beginning balance that was inputted in the Fund Maintenance window, as of
12/30/2013. This should have come from the ending balance bank statement
on Dec. 31st 2013. The Jan. 2014 bank statement shows two deposits, $200.00
and $150.00, along with two checks, for $300 and $80. The user entered $380
for the checks as seen in the red oval. They also entered in $1,450 ( $1,100 from
the bank statement and $350 for deposits). The ending balance on the bank
statement is $1,070 and matches the bank's ending balance from the physical
statement.
© 2014 Icon Systems Inc.
Introduction
19
“You’re all set!”
Disclaimer: Icon Systems Inc. does not provide professional advice. Icon Systems Inc. is not in the
business of providing legal, financial, accounting, tax, health care, real estate or other professional
services or advice. Consult the services of a competent professional when you need this type of
assistance.
© 2014 Icon Systems Inc.