The income statement
What the church received and spent over the period, with last year alongside, and above all what is not in it: loan capital, buying an asset, opening balances.
The income statement answers one question, and one only: what did we receive and spend over the period? Income on one side, expenses on the other, the difference at the bottom.
It is the document your members' meeting understands fastest. It is also the one most often presented wrongly, because people confuse it with cash.
Open it
- Open Finance, then Reports, Accounting section, Income statement tab.
- Choose the period at the top of the page.
- Income then expenses appear account by account, with the previous year's column alongside.
A figure alone cannot be read
A result of 6,400 says nothing. The same figure next to last year's 14,900 says a great deal, and immediately raises the right question.
That is why the previous year column is shown by default and not behind an option. A board discovering a decline at the moment of presenting it has had no time to explain it.
Tip: before the meeting, scan the variation column and prepare one sentence for every gap above 20%. Those are exactly the lines you will be questioned on.
What is NOT in the income statement
This is the surprising part, and the most important. Four very common church movements do not go through the income statement, or only partly.
Repaying loan capital. When you pay 850 to the bank, only the interest part is an expense. The 660 of capital does not make you poorer: it turns cash into a reduction of debt. See loans.
Buying a durable asset. A 3,000 projector does not cost the year 3,000. It enters the assets, and it weighs on the result in slices, year after year, as depreciation. See fixed assets and depreciation.
Opening balances. Money your church owned before keeping its books here is not this year's income. It goes straight to net assets. See the statement of net assets.
A gift received for a future project. It is indeed income of the period, but it is not available for anything else. The income statement does not make that distinction: it is the statement of net assets that separates restricted from unrestricted funds.
Warning: a positive result does not mean you have money, and a negative result does not mean you lack it. A year with heavy capital repayment can show a fine result and tight cash. Always present the income statement together with the statement of net assets.
Result and cash, the classic confusion
| Event | Effect on cash | Effect on the result |
|---|---|---|
| Offering of 500 in cash | + 500 | + 500 |
| Buying a 3,000 sound system | − 3,000 | − 1,000 the first year (depreciation) |
| Loan instalment of 850 | − 850 | − 190 (interest only) |
| Opening balance of 12,000 | + 12,000 | none |
The last three lines explain nearly every "I don't understand why these two figures don't match" in a church board.
The banner that confronts the two statements
At the bottom of the income statement, a banner confronts your result with the change in your net assets over the same period. It shows even when all is well.
The rule it checks: the change in your net assets must be explained by the result, plus any equity movements.
Note: those equity movements are almost always nil. The one common exception is the year you record your opening balances: they change your net assets without passing through the result, and the banner says so instead of crying disagreement.
If the two statements diverge without that explanation, one of them is wrong. Publishing a result without confronting it with net assets commits no one: this check is what makes the document defensible before a board or an auditor.
Common mistakes
- Recording a loan instalment as an 850 expense. The result is inflated and the debt stays frozen on the balance sheet as if you had never repaid a cent.
- Expensing a whole building the year you buy it. That year's result is catastrophic, the next twenty are flattering, and neither is true.
- Comparing a 10-month period with a full year. Use the period shortcuts ("This year", "Last year") rather than hand-typed dates.
- Forgetting to post the depreciation charge before closing. The result then ignores the year's wear. The Fixed assets tab shows the pending amount in orange for that reason.
Printing it
The Print button produces the income statement on your church letterhead, with the period, the comparison, the issue date and the author on every page. The consistency note with net assets prints with it.