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Q&A: Accounting for Sales of Pastor's Preaching Resources

What is the proper way to allocate income of sales?

We are looking at a cost split for preaching resources sold in our gift shop at our church. It will be 50/50 split with the pastor and our store. What is the proper way to account for the pastor's portion of that income? He has a 501(c) 3 for his book selling and it would be transferred to him through that account.

While there are several issues that surround this, it would probably be best if you structure the transaction to purchase the books through the 501(c)(3) and not directly from the pastor. You should still make sure you have board approval since it is a related party transaction. Also, be sure the resources are purchased at a fair market value so the church is not paying an unreasonable amount. If you purchase these from the other organization, the pastor can work out a royalty-type transaction with that entity. Therefore, you would have an increase in inventory and ultimately an increase to the cost of goods sold account and no direct financial transaction with the pastor.

Vonna Laue has worked with ministries and churches for more than 20 years. Vonna was a partner with a national CPA firm serving not-for-profit entities through audit, review, tax, and advisory services. Most recently, she held the role of executive vice president for a Christian ministry that works to enhance trust in the church and ministry community.

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Posted:
  • September 9, 2009

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