Why Does Every Entity Need a Net Asset Account?

ParishSOFT Accounting provides account segments called Entities to allow organizations to categorize accounts into their larger natural divisions within the same General Ledger. 

For example, an organization may have the following divisions: 

1. Church
2. School
3. Cemetery

Permanent Accounts

Permanent accounts are those that appear on the balance sheet, such as:

1. Assets
2. Liabilities
3. Net Asset Accounts
   • Net Asset Accounts are permanent ParishSOFT Accounting accounts used to track the ongoing balance for each entity. 
   • In for-profit accounting, they are known as Equity Accounts. As shown in the table below, each Entity is assigned its own Net Asset Account.
   • Note: GAAP Accounting uses two Net Asset Accounts. 

Division	Entity	Net Asset
Church	1	N-1-300-1
School	2	N-2-300-1
Cemetery	3	N-3-300-1

Temporary Accounts 

Temporary Accounts are used to track the yearly balance for each entity and account. Essentially, any account that appears in the Statement of Activities.  

The most common types of temporary accounts for non-profit organizations are:

1. Income
2. Expenses 

Income and Expense Accounts are also assigned to an entity. This helps organizations track how much money has come in and gone out, respectively, for each Entity/Division.

Division	Entity	Account Code
Net Asset Church	1	N-1-300-1
Offering Inc Church	1	I-1-400-1
Admin Exp Church	1	E-1-500-1

When the fiscal year closes, ParishSOFT Accounting rolls the year-end income and expense balances into permanent Net Asset Accounts. This allows the Income & Expense accounts to begin the new fiscal year with zero balances.  

1. At the end of the fiscal year, closing entries are used to transfer the entire balance from each temporary account to its net asset account, which is a permanent account. 
   • The net amount of the balances shifted constitutes the gain or loss that the organization recorded during the period.
2. Once year-end processing is complete, all temporary accounts have been emptied and are therefore "closed" for the current fiscal year. 
3. A flag in the accounting software is set to close the old fiscal year, preventing any further transactions from being entered during that period. 
4. The new temporary accounts are opened, now with zero balances, and are used to begin accumulating transactional information for the next fiscal year.

Important: Only temporary accounts are closed at year-end. Permanent accounts remain open at all times. 

Updated June 02, 2026 15:27