Connection Card Pro Help & Documentation

What is a Chart of Accounts?

This article is prepared to give you an overview of the Chart of Accounts in general practice. For help with Connection Card Pro's Chart of Accounts specifically, please click here.
Your Chart of Accounts is the foundation of your organization's accounting and bookkeeping. It is used as the basis for generating Balance Sheets, Income Statements and other reports throughout the year. Additionally, non-profit organizations have additional reporting and accounting requirements that many bookkeeping software packages aren't designed for.

Connection Card Pro has been designed specifically to help non-profits keep their books.

What is the Chart of Accounts?

Your Chart of Accounts lists all of the accounts and funds that exist within your organization. Unlike a business, which usually maintains one general ledger, as the business's sole goal is to generate revenue, your non-profit organization may have multiple funds (or ledgers). Within non-profit accounting, some grants, government support, or other income that you receive may be restricted to a certain use. Because of this, it must be recorded in a separate fund and not as part of your General Ledger Fund, which is typically an unrestricted fund allowing your organization to use income received for any purposes which are aligned with your organization's goal and mission.

A fund is the top, first or largest order of division within the hierarchy of your books.

Accounts are the second tier in the accounting hierarchy. Accounts are used to separate balances, debts, income and expenses. The more accounts you have, the more specific your reporting will be.

Types of Accounts

There are four primary types of accounts (in addition to Funds, also known are Ledgers or Equity Accounts):

Asset Accounts
An Asset Accounts represents any assets that your organization owns. A bank account is considered an asset, and it's value is the balance of that bank account. You may also wish to track land, buildings, or large equipment that your organization owns, as these are all part of your organization's assets and net worth. Typically, Asset Accounts will be split into Current Assets and Fixed Assets. Current Assets are generally the assets which are revolving or changing consistently, such as Petty Cash, Bank Accounts, etc. Fixed Assets are generally held long-term, such as land or property.

Accounts Receivable
Your Accounts Receivable account is an asset account and it represents any money that someone else owes your organization. If you've invoiced someone but have not received payment yet, that becomes a positive balance to your Accounts Receivable account. This is an asset, as it represents someone's debt to you, thus future guaranteed income.

Liability Accounts
A Liability Account represents any amount that your organization owes to any other party. This includes loans, mortgages, credit cards or credit that you have with another business on Net 15, Net 30 or Net 60 terms (for example). Tracking your debt and liabilities is necessary to generate a property balance sheet, as your outstanding debt decreases the available equity within your organization. You have a recurring or revolving balance with vendors represented by these accounts. You are tracking charges or purchases made on those accounts to maintain a balance owing and then recording payments made to that account. Like Asset Accounts, Liabilities may be separated into Current Liabilities (credit cards, etc.) and Fixed Liabilities (Long-Term Loans).

Accounts Payable
Just like an Accounts Receivable account, your Accounts Payable account represents money that you owe but which has not yet been paid or accounted for in a Liability Account. For example, when a bill is received from your power company, that bill gets entered as an amount payable.

Income Accounts
Income Accounts represent a source of income. This is ideal for tracking where and how income was generated, not necessarily for how you plan on using it. For example, your church may have one income account called "Tithes and Offerings" to represent income received in the course of your tithes and offerings. You may have another income account to represent a specific fund raiser and another income account to represent Book Sales. Of course, you likely have many more than just three income accounts, but the ideal method of creating income accounts is that they represent the source of income, not the designation. The reason for this is two-fold. First, when most tax filiings are interested in the source of the income, separating your Income Accounts based on the source helps you at tax time. Second, by recording income based on its source rather than its intended use, you are able to determine which sources seem to be the most effective. Within Connection Card Pro, you can also tag any income received with a Department, Project or Fundraising to generate other reports specific to your organization's needs.

Expense Accounts
Expense Accounts represent how money is spent and idaelly are being created to represent a type of expense rather than a vendor or the department/ministry who spent it. For example, an expense account called Youth Ministry and an expense account called Childrens Ministry is representing who spent the money, but both of those ministries are likely spending money on all sorts of expenses. Whereas, a handful expense accounts each named Utilities, Literature, Supplies, etc. will more specifically represent the types of things those ministries are spending money on. Within Connection Card, you can also tag an expense with the Department or another Purpose and generate reports specific to your organization's needs outlining how much each Department is spending, however, tax forms will require reporting expenses based on the type of expense, not which department is responsible for it.

What Reports are Generated?

There are typically a few common reports that any organization should be expected to be able to generate:

Balance Sheet
This standard report clearly shows the organization's total assets, liabilities and equity based on the Chart of Accounts that you've setup and the income and expense records that you've recorded.

Income Statement
This standard report clearly shows total income generated for a period of time, along with a breakdown of income sources, as well as total expenses over the same period with a breakdown of types of expenses. It helps you to clearly see how income is generated and where it's being spent.

Tag Report
In addition to the standard reports, Connection Card Pro gives you the ability to quickly generate a report based on any tags (Departments, Divisions, Projects, Purposes, Fundraisers, or Tax Classifications). This helps your organization to generate more ogranization-specific reports to see which departments/ministries are recieving income or spending, and which fundraisers are most effective or how expense each project you take on is.