In response to your February 24, 2009, blog posting that suggests, "Unless a church wishes to report its financial results using full GAAP accounting, I recommend recording equipment purchases as expenses and omitting any depreciation concern," I am afraid the church will not have "formal control" over the assets nor a good record (or evidence) of its possession (other than the invoices) when unexpected events occur, say if it is stolen. Is it wise to ignore Generally Accepted Accounting Principles?
You may wish to review the full blog posting, but the question allows me to address some important points. Each church should be able to identify the property it owns. Catastrophic events such as fire and vandalism do befall churches. It may be wise to video church property on a periodic basis for this very purpose. Of course, off-site storage of equipment lists will aid greatly in documenting a loss.
My point about using a strict cash basis of accounting does not address this need. My suggestion to use this very simple method relates 1) to the lack of trained accounting personnel in many small churches (including provision for turnover in often voluntary positions) and 2) to the lack of understanding of more complex accounting reports by the common layperson. The use of the cash basis does not excuse these churches from maintaining proper fund accounting for designated gifts.
Churches that have the ability to employ trained personnel should use GAAP. These same personnel will also have the understanding necessary to communicate financial results to others. Several of the Christian organizations that I serve maintain their books on the accrual (GAAP) basis, but budget on the cash basis. This requires trained and experienced accounting personnel but seems to satisfy the need for GAAP accounting systems and for lay-friendly reporting of receipts and disbursements. Readers who want more information regarding these issues may request a copy of a presentation I have given to students of college-level accounting courses.
What happens to the real and personal property purchased by the church in the event of its liquidation? To whom should it be distributed?
These are questions that the church constitution should answer in a manner consistent with local law. Most U.S. church constitutions address this contingency by granting the transfer of its assets to another church or Christian ministry that can carry out the spirit of the original church's mission.