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

The definition of fund accounting that is used in non profits is the following:
“Fund accounting is an accounting system for recording resources whose use has been limited by the donor, grant authority, governing agency, or other individuals or organizations or by law.[1][2] It emphasizes accountability rather than profitability, and is used by Nonprofit organizations and by governments. In this method, a fund consists of a self-balancing set of accounts and each are reported as either unrestricted, temporarily restricted or permanently restricted based on the provider-imposed restrictions.”

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.

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.

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

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

Contributions (donations) is revenue to the church.

As stated in the correct answer, liabilities are what is owed to someone else. Funds and their balances are what the church currently owns – ie money in the bank so to speak. It is not a debt! The chart of accounts has five distinct areas – assets, liabilities, revenue, expenses, and equity. Funds are considered equity accounts according to FASB. These five areas have specific account types that belong within each one. In other words you wouldn’t list an expense in the revenue section. Likewise you would list an equity account in the liability area.

The statement of financial position is the only report that gives you the dollar amounts as of one point in time. This is commonly called the balance sheet in for profit companies. The other financial statements like statement of activities and cash flow report show how the money came into the company and left the company. The budget report is not considered a financial report.

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.

This is an accounting 101 question. Please see Investopedia. This equation is not the same as Assets – Liabilities = Equity (or Fund’s Balance). The equation has multiple formulations based on what is needed – ie balance sheet.

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

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

The work around for Quickbooks and funds is to use classes. However, according to Quickbooks own site they say this about classes.

The Balance Sheet by Class report can’t classify some transactions in QuickBooks. Some of those transactions create unclassified amounts on the report.

By not classifying every single transaction’s disbursements, your balance sheet will never be right. Some of the transactions that can’t be classified are journal entries with unbalanced classes, a payroll liability check, and transfer of funds between two church funds.