Nonprofit Financial Statements: Complete Guide with Examples

This report also shares how things can be improved by increasing revenue and decreasing costs. This article will discuss what a statement of activities entails and why nonprofits need them. Nonprofits can use this report to file Form 990 with the IRS and provide donors with transparency and trust in the organization. You should look at your Statement of Activities every month and compare to previous periods. Identify trends and changes in sources of revenue, expenses, and changes to net assets.

Importance of Regular Review by Stakeholders

These funds are free from any external restrictions and available for general use. Sources of unrestricted funds include revenue from general donations, membership fees, or grants that came without specific instructions. However, as you know a The Key Benefits of Accounting Services for Nonprofit Organizations nonprofit is not like any other business, so it is no surprise that nonprofit financial reports are different. For nonprofit organizations, the financial report that meets the requirements for an income statement is called the Statement of Activities.

Change in Net Assets: How much money did you make?

The statement of financial activities is a document that lists a nonprofit organization’s income and expenses for a given reporting period. These two documents provide a brief overview of how https://greatercollinwood.org/main-benefits-of-accounting-services-for-nonprofit-organizations/ the organizations’ net assets have changed during that given period. Internal users of financial reports include the organization’s management team, founder, Board Members, audit committee, and financial leadership. The report can be used as a guideline to plan projects, community events, and making operational decisions. The report can tell leadership when it’s time to increase fundraising activities or cut back on payroll costs.

Client Accounting + Advisory Services

The IRS 990 doesn’t really qualify, since it’s done once per year and first-and-foremost as a tax compliance document. And because it’s an internal report, you can set it up to show the information however is best for your team. The report displays the budget and the actual numbers side-by-side so you can easily see where you’re beating your plan or coming up short. But it won’t show you what happened to the cash you spent, which is generally what board members want to know. The difference between Revenues and Expenses is reported as Change in Net Assets.

Purpose

The two main types of nonprofit revenue are contributed revenue and earned revenue. Your nonprofit statement of activities is split into several different sections. Meanwhile, horizontally, it’s split into your organization’s unrestricted and restricted revenue. The cherry on top is that an accurate income statement can help your organization complete your annual tax return.