Accounting applications often use different terms to refer to the same items, which can lead to confusion. Here's an overview of some of the terms we use (and how we define them) in ChurchTrac. Take a quick look so you can understand what we mean when we refer to accounts, categories and funds.
Accounts are bank accounts--like a checking account or savings account, or it may be a credit card, mortgage, or other loan account. Typically an account is held at a financial institution, like a bank, and you'll receive a monthly statement for an account.
A Fund allows you to track a special or designated balance of money. For example, your church may have a Youth Fund, or a Building Fund. The money in a fund is typically designated for a specific purpose. General Deposits and Expenses that are not designated for a specific purpose are said to be in the "General Fund." Money in a fund may even be spread between multiple bank accounts. For example, a portion of your Youth Fund resources may be deposited in your checking account, and some may be in a Savings account. Every transaction that you enter will be assigned to one or more Funds. (We'll cover transaction entry in more detail below). When used correctly, you'll be able to see at any given moment how much is available in each fund that you have set up.
A Category allows you to track where money is spent or received for reporting purposes. A transaction's amount is assigned to one or more categories, which allows you to see how much you have spent or received in a particular category over a time period, or to see how your spending compares to your budget. To help clarify, let's see how Accounts, Categories and Funds work together, and how they are different. Let's take the example of the Youth Fund again.
Let's suppose that the cost for youth camp is $3000. To begin, let's suppose there is no money ($0) in the Youth Fund.
However, as the kids begin making payments for 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 suppose that we received $2500 in youth camp payments. At this point we could run a report and 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 $600 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 $600 in the "Camp Transportation" categories. Our reports also show us that we have $1900 left in our Youth Fund (the balance after spending $600 for transportation). So we are able to 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. Typically, you'll want to use as few Funds as possible.
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 general catch-all fund. Any unallocated receipts or expenses should be placed into the General Fund.