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Church Accounting Quiz

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122
Created on January 07, 2021

Church Accounting Quiz

This quiz will test a person's church accounting knowledge.

Your results are for personal use and only available to you.

1 / 15

Category: General Accounting Questions

Question:

What does GAAP stand for?

GAAP stands for Generally Accepted Accounting Principles. See the definition at the CFA Institute. Keep in mind all churches must follow GAAP.

2 / 15

Category: General Accounting Questions

Question:

Who restricts the net assets for churches?

The only person that can restrict contributions are donors. While the church's council may say they are taking donations for a purpose, they can later change that purpose by another church's council vote or whatever procedure they have described in their by laws.

3 / 15

Category: General Accounting Questions

Question:

Are churches exempt from all federal income taxes?

Churches are not exempt from the UBIT (Unrelated Business Income Tax). If they have gross receipts of over $1,000.00 they must file a tax form. This pdf goes over what UBIT and gives some clear examples. As always consult a CPA for your church's unique operation.

4 / 15

Category: Accounting Entries

Question:

You have to record an entry to pay for the monthly church van loan. Which accounts are needed?

5 / 15

Category: General Accounting Questions

Question:

The church can lose its tax exempt status if it doesn’t follow proper fund accounting guidelines?

What typically happens is the church does one of two things which would start an IRS audit. They messed up on payroll taxes or they don't report Unrelated Business Income Tax (UBIT). A lot of churches charge rental fees throughout the year and over a certain amount, they must file the right forms to declare that income. In other words not all revenue is tax exempt for churches. Once the IRS sees a mistake they can open the audit which means it can turn into an almost limitless scope. According to the IRS Pub 1828,

the types of required records frequently include organizing documents (charter, constitution, articles of incorporation) and bylaws, minute books, property records, general ledgers, receipts and disbursements journals, payroll records, banking records and invoices. The extent of the records necessary generally varies according to the type, size and complexity of the organization’s activities.

6 / 15

Category: General Accounting Questions

Question:

The church pays cash for a contractor's services to fix something in the building. Recording the withdrawal would result what kind of change in the accounting books?

When the church pays for a service, money leaves the organization from an asset account which indirectly lowers the equity (or fund balance).

7 / 15

Category: General Accounting Questions

Question:

At the end of the accounting period, the liabilities total $20,000, and equity (net assets) total $52,000; then what must be the total of the assets?

Liabilities plus equity will equal assets. This comes down to the balance sheet equation where Liabilities + equity equals assets.

8 / 15

Category: Balance Sheet Questions

Question:

In fund accounting, the Statement of Financial Position is equivalent to the...

According to FAS Topic 958 the Statement of Activities is equivalent to the income statement that for profit industries use.

9 / 15

Category: General Accounting Questions

Question:

Which account is not included on a statement of financial position?

Donation revenue (or any revenue) accounts are not reported on the balance sheet.

10 / 15

Category: General Accounting Questions

Question:

What is an example of an expense?

The other options while they are paid out of the church's accounting checkbook, they are not considered expenses. Paying a bank loan lowers the principle of a liability.

11 / 15

Category: General Accounting Questions

Question:

Are accounting funds and contribution funds different?

Donation funds and accounting funds are different. You will want to review this article. Donation funds are reported on differently than accounting funds for example. Donation funds start over each year. Accounting funds carry a balance forward each year. This is just one difference.

12 / 15

Category: General Accounting Questions

Question:

What are the two accounting methodologies that organizations use? (select two)

There are two main accounting methods called cash accounting and accrual. See Investopedia.

13 / 15

Category: General Accounting Questions

Question:

In what section of the statement of activities is contributions recorded under?

Contributions (donations) is revenue to the church.

14 / 15

Category: General Accounting Questions

Question:

What are the disadvantages of using revenue accounts to track funds?

To fully understand this question the user must understand the fund accounting principles. They would want to review the What is Fund Accounting article. Simply stated using revenue accounts has too many problems to figure out how much each church function (ie mission) has to spend or has spent.

15 / 15

Category: General Accounting Questions

Question:

Should multiple checkbooks be used to track funds and their balances?

When multiple checkbooks (or worst sub accounts of checkbooks) are used, that means the system can't do proper fund accounting. It can't take the assets account (the checkbook) and break it up into various funds - or equity pieces. Using any type of accounts in the chart of accounts to define the funds is incorrect. They belong in the equity section. To read more, check this article out.

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