Who said money and religion have to be separate?  It was a Franciscan monk in the late 15th century who is credited with developing the system of double-entry bookkeeping.  Lucas Pacioli, who collaborated with Leonardo da Vinci for many years, developed the system that is still in use today.

   In double-entry bookkeeping, everything balances.  Those who are trained in bookkeeping talk about “debits” and “credits.”  The difficulty for those of us who have not taken accounting coursework is that half of the time, the transaction is intuitive (if you want to record income received, you credit it) but the other half of the time, it is counter-intuitive (if you make a deposit to your bank account, you debit it).

   So let’s stick with “increase” and “decrease” for now and learn what happens.  Once we get the concept, we can pretty much let go of the debits and credits anyway, since accounting software will take care of it for us, hidden in the background.

   The four types of transactions (asset, liability, expense, and income) are all interrelated.  If we explore a few examples, we’ll begin to see patterns.

• If you purchase coffee for coffee hour, you increase your fellowship line (expense) and you decrease your bank account (asset).
• If you transfer money from your investment account to your checking account, you decrease the investments (asset) and increase checking (asset.)
• If you purchase stamps using a church credit card, then you increase your postage line (expense) and increase your credit card balance (liability).  (When you pay off the credit card, you decrease your credit card balance and decrease your checking account).
  
• If you receive a deposit for nursery school tuition for next year, you increase your bank account (asset) and increase your prepaid tuition (liability.)  Then, when school starts, you decrease your prepaid tuition (liability) and increase the tuition line (income.)
• If you make a mortgage payment, you decrease your bank account (asset), increase mortgage interest (expense), and decrease mortgage principal (liability.)

From these examples, we can discern the following principles:

• If the two sides of a transaction are both the same type, then one will increase and the other decrease.
  
• Assets behave like expense – and income behaves like liabilities.  If a transaction involves an asset or expense on one side and income or liability on the other, then either both will increase or both will decrease to keep everything in balance.  Similarly, if a transaction involves an asset and expense or if it involves income and liability, then one will increase and the other will decrease.
• If something happens in multiple steps, each step along the way will balance.  In example #3 above: increase postage expense & increase credit card liability, then decrease credit card liability & decrease bank account.  The middle two cancel each other out, which leaves you with the transaction in example #1 above.
• If you have a split transaction (such as a loan payment), then the total of the increases and the decreases won’t necessarily balance, because some are debits and some are credits – but the total of the debits will always equal the total of the credits.

   A note for all of us who are theologically, rather than financially, trained:  Regarding debits and credits, you can get by memorizing only two concepts: to increase a liability, you credit it and liabilities and income behave alike.  (Remember that L’s and I’s look alike).  From there, you can figure everything else out.  If increasing a liability credits it, then increasing an asset must debit it, etc.  In #5 above, to increase an interest expense you debit it, to decrease mortgage principal (a liability) you debit it, and to decrease an asset you credit it.  So the credit amounts and the debit amounts do balance, just like the friar taught us 500 years ago.

   The advent of computerized bookkeeping has made double-entry accounting more accessible to small organizations.  A picture of a check comes up on the screen – you fill in the date, the payee, the amount and what you’re charging it to – and the software does the rest, debiting the expense and crediting the asset.  This can be a good thing … increasing the ability of churches to monitor their financial activity and be faithful stewards of their resources.  But “with great power comes great responsibility.”  If we don’t know just what we’re doing, the tasks of bookkeeping can feel confusing and overwhelming, and ultimately decrease the congregation’s confidence in its stewardship.