October 10, 2012

Recording Church's New Building (and Depreciating it)

Question:

A church recently built a new church building. How should a church account for its fixed assets?  How should it account for the church building on its balance sheet?  How does it recognize depreciation?

Answer:

If a church uses full Generally Accepted Accounting Principles (GAAP) for its books, then fixed assets must be capitalized and depreciated. However, in many situations, it is our belief that many churches should use the modified cash basis. This means that capital asset purchases are recorded as expenses, and not as depreciable assets. Expensing asset purchases allows the church’s congregation to more easily understand the financial situation of the church. This concept of expensing assets is discussed at greater length in the following blog posts:

Church Accounting for Fixed Assets
Churches Recording Depreciation

For a MS-PowerPoint presentation on financial management for a church, follow the link provided below to MinistryCPA.org and click on the Presentation: Church and Christian Ministry Financial Management download.

Church and Christian Ministry Financial Management 

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