Basic Terminology and Examples
Accounting software often uses different terms to refer to the same items, which can lead to confusion. Here's an overview of some of the terms used in ChurchTrac Accounting.
Basic Terminology
To be successful with ChurchTrac Accounting, it’s important to start with a clear understanding of three core concepts: Bank Accounts, Funds, and Categories. These work together to help you accurately track, designate, and report your church’s finances.
Bank Accounts
In ChurchTrac, Bank Accounts track money you actually have (Assets) or money that you owe (Liabilities).
Most bank accounts are held with a financial institution that provides a monthly statement. Each month, you’ll reconcile your ChurchTrac bank account with that statement to ensure all transactions are accurate and nothing is missing.
Examples of Asset-type Bank Accounts include:
- Checking accounts
- Savings accounts
- Money market accounts
Examples of Liability-type Bank Accounts include:
- Credit cards
- Mortgages
- Long-term loans
Learn more about Bank Accounts ›
Funds
In ChurchTrac, all money is assigned to one or more Funds. Funds are like buckets that hold money set aside for specific purposes.
Examples of Funds include:
- General Fund
- Missions Fund
- Building Fund
Funds are not tied to a single bank account. A single fund can span multiple bank accounts, and each fund has its own running balance that is separate from your bank account balances.
Whenever money comes in or goes out, ChurchTrac automatically increases or decreases the balance of the affected fund. You can always see the current balance of each fund on your Accounting dashboard.
You can create as many funds as needed, but most churches use between one and five funds. If you find yourself needing many more, it may be worth reviewing whether some of those purposes are better tracked with Categories instead.
Categories
Categories explain why money moved into or out of a bank account.
Think of a category like a sticky note. Each time money comes in or goes out, you attach a label that describes the purpose of that transaction.
Unlike Bank Accounts and Funds, Categories never hold money. They exist purely for tracking, budgeting, and reporting.
It’s normal to have dozens of categories, since they simply describe activity. You can create subcategories to group similar items together and use as much detail as you want in your budgets.
Typically, you’ll use:
- Income Categories for money coming in
- Expense Categories for money going out
When creating a budget, you’ll specify how much you plan to receive or spend for each category during a given time period.
In Summary
Bank Accounts track money you have or money you owe.
Funds are like buckets that track how your money is designated and how much is set aside (or owed) for each purpose
Categories are like sticky notes that describe why money moved in or out of your bank accounts.
Understanding how these three pieces work together is the foundation for accurate, stress-free accounting in ChurchTrac.
(Tip: We recommend reviewing the ChurchTrac Accounting Chart for a visual overview of how these pieces fit together.)
Examples
To help clarify, let's see how Accounts, Funds, and Categories work together, and how they are different.
Let's take the example of the Youth Fund, and suppose that the cost of the youth camp is $3000. To begin, let's assume there is no money ($0) in the Youth Fund.
As the kids begin making payments for the youth camp, this money is deposited into your Checking Account. These camp payments are entered as a Deposit in your Checking Account register and assigned to the Category of "Camp Payments," as well as assigned to the fund named "Youth Fund."
Let's imagine that we received $2500 in youth camp payments. If we ran a report, we would see that we received $2500 in the "Camp Payments" Category. We also see that our Youth Fund has a balance of $2500.
Next, we have to spend some money to cover the cost of transportation to and from camp. So we write a check from our Checking Account and spend $750 for transportation. This transaction is assigned to a category called "Youth Transportation," and like before, it is also assigned to the Youth Fund.
Since this is a debit transaction (money is going out), our report now shows that we received $2500 for "Camp Payments" and spent $750 in the "Camp Transportation" category. Our reports also show us that we have $1,750 left in our Youth Fund (the balance after spending $750 for transportation).
We can assign various categories to transactions to help classify them for reporting or budgeting purposes. We can also place transactions into Funds so we can see how much is available for a particular purpose.
Pro Tips
Money can be spread out between multiple Bank Accounts.
Some churches have a fund for everything ("New Lightbulb Fund"). While you can set up and use as many funds as you wish, doing so will add to the overall complexity of entering and maintaining your data. Any general or budgeted deposits and expenses will likely work best being assigned to the "General Fund," which is the catch-all fund. Any unallocated receipts or expenses should be placed into the General Fund.
In most cases you should not delete a Fund. Any Fund that has a balance, or that has history that you need to retain should not be deleted. Instead, we recommend that you make the Fund inactive, which will hide it from your dashboard and most lists. If you do delete a Fund, all of its entries will be reallocated to the General Fund, which cannot be deleted.