Accounting for religious organizations

By law, the introduction of accounting is mandatory for all legal entities, including religious organizations. The current Accounting Regulations define uniform principles and methods of reporting on individual assets of non-profit organizations. They create an opportunity to choose an accounting policy by approving at the regulatory level the possibility of maintaining simplified financial reporting (P(S)BO 25, approved by Order of the Ministry of Finance № 39).

Among the main features of accounting for religious organizations, the following should be highlighted:

• relevant organizations have the right to independently determine their accounting policy, approve the rules of document management;
• income is formed mainly at the expense of voluntary donations, fees for ceremonies and services, and therefore separate rules will be applied for accounting for charitable assistance received;
• simplified financial reporting provides for the submission of a balance sheet, a report on financial results (part of the report on the use of income).

This article is also intended to explore the main aspects of accounting for the organization’s income and expenses, taking into account accounting entries and the features of filling out individual reports.

Accounting for religious organizations

Religious organizations that meet the criteria for a non-profit organization annually submit a Report on the Use of Income by March 1 and an Annual Financial Report by February 28. Below are their main characteristics.

Report on the use of income and expenses

The main document for the transparency of any financial transactions is the Report on the use of income. It reveals the sources of funds and their intended use.

As a general rule, this report should indicate the following income of religious organizations:

1. voluntary donations from individuals and legal entities;
2. fees for holding services, sacraments, ceremonies and other religious rites;
3. sales of books, icons, candles and other religious goods;
4. funds received from other organizations and institutions for specific purposes (temple renovation, charity projects, etc.);
5. interest on bank deposits, rent payments, grants, etc.

The report should also reflect the distribution of expenses by target areas related to statutory activities. For more detailed information, you can contact an accountant online from our law firm.

Annual financial report

Such reporting expresses the financial condition and results of activities. The annual financial report consists of a number of documents that are also subject to completion and submission to the State Tax Service, in particular:

• balance sheet (form 1);
• statement of financial results (form 2), cash flow (form 3), equity (form 4);
• notes to the annual financial statements (form 5).

Primary documents for accounting of religious organizations

It is imperative to keep documentation that confirms the reliability of accounting. Its main types include:

1. receipts and payment orders;
2. acts of work performed (services rendered);
3. invoices;
4. cash orders;
5. settlement and payment statements (on payment of salaries to clergy);
6. acts of write-off (for example, of worn-out fixed assets and materials);
7. commercial and civil contracts.

Basic accounting entries for accounting for religious organizations

Accounting is based on the principle of double entry (each transaction is reflected by the debit of one account and the credit of another). Particular attention should be paid to accounting for income and expenses received for carrying out statutory activities. Below are the basic accounting entries for recording the specified business transactions:

• receipt of voluntary donations – Debit 301 or 311 (depending on the cash or non-cash form of payment), Credit 718 (non-targeted donations) or 484 (targeted donations);
• payment for ceremonies and other religious services – Debit 301 or 311, Credit 719;
• proceeds from the sale of religious literature and items – Debit 301 or 311, Credit 701 (sale of products manufactured by a religious organization) or 702 (if resale), etc.

To summarize, the main features of accounting for religious organizations are their independence in forming accounting policies, the specificity of income accounting, the ability to submit simplified financial statements. Perhaps the most important condition for proving the transparency of reporting is confirmation of all business transactions by primary documents. When performing accounting, it is also worth using separate accounts and relevant accounting entries (part of which is given above). Qualified accountants “Prykhodko and Partners” have extensive experience in accounting for religious organizations and can provide full accounting support for their activities.

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