The Statement of Financial Activity (Profit & Loss)
What is it?
The most fundamental report that church leadership will want to review on a consistent basis is the Statement of Financial Activity. Businesses refer to this report as the Profit & Loss Statement.
In a previous blog, The Backbone of your Bookkeeping – Your Chart of Accounts, we discussed establishing accounts that can capture the revenue or donations that the church receives and the expenses that the church incurs. It is these accounts that are then reported on the Statement of Financial Activity. The revenue is reported first and then the expenses are deducted to give your church a net income or net loss balance at the bottom of the report.
How should you format this report?
This report is prepared for a given period of time, i.e. a given month, quarter or year. These accounts are “temporary” in that they will be zeroed out at the end of your church’s fiscal year* with the net income or net loss being recorded on a second statement, the Statement of Financial Position (to be discussed in a separate blog).
We would suggest that you present this report each month in a “comparison format”. That means you would show several columns of amounts on the report. For example, show the current month compared to the previous month, or perhaps the year-to-date total. It may even be more helpful to show a comparison to the same month in the previous year.
*Your fiscal year is the 12 months your church decides to use for budgeting and recording income and expenses. Most churches use a fiscal year from January 1 to December 31. However, it is possible to use a different period such as September 1 to August 31. We will discuss this in a separate blog.
Xero allows you to customize all financial reports so that you can include all of those various comparison columns. QBO allows some customization as well, but it is not as flexible as the Xero reporting. GoodBooks is happy to help you customize the report to fit your church’s needs.