Nonprofit Statement of Financial Position or Balance Sheet

nonprofit income statement

A cash flow statement for a non-profit organization reports the amount of cash a company has on hand by factoring its operation costs, assets, and financing. There are several insights that you can pull from your nonprofit statement of financial position. It provides information about the overall financial health of your nonprofit. That’s because it shows the amount of flexibility you have in your funding to pay for additional operating expenses necessary for growth.

nonprofit income statement

Doing so runs the risk of upsetting donors and can cause issues with the audit process. A reliance on manual processes significantly increases the possibility of errors. We can make this basic measure of liquidity even more useful by trending the figure over time. Each nonprofit sets its own target based on its business model and receivables cycle. In the example below, the nonprofit set its Target Operating Reserve at 120 days of cash on hand. Trend lines can show us larger patterns at work and the big picture about where our organization is headed.

Basic Nonprofit Financial Statement

We can use trend analysis to get at the “why” questions underlying our financial activity. You will have access to a pre-formatted spreadsheet that will help you track your nonprofit’s income and expenses. Fortunately, there is help for nonprofits that want functional financial reports and cohesive accounting procedures. Consider working with a nonprofit accounting expert at JFW Accounting Service today to get your entity on the right financial track. As a nonprofit, your mission is your main goal, however a net asset surplus is key to the growth and sustainability of the organization. The numbers pulled for your nonprofit balance sheet all come from your organization’s chart of accounts, which lists out all of your accounts and ledgers to keep your finances in order.

  • Fixed Assets contain buildings, vehicles, furniture and large equipment and their accumulated depreciation, which helps you determine the net value of your fixed assets.
  • Additionally, the balance sheet provides insight into the organization’s liquidity, or its ability to meet its financial obligations in the short term.
  • Our firm has expertise in industries including manufacturing, construction, real estate, financial services, healthcare, government, education and retail.
  • Interpreting a non-profit cash flow statement involves analyzing the relationship between cash inflows and outflows, as well as the organization’s overall cash position.
  • You will need to take an extra step to export all your data into a spreadsheet to generate financials.
  • At Capital Business Solutions, our experienced team of non-profit accounting software excerpts knows firsthand how accurate financial reporting helps to build trust and credibility with supporters.

Page 3 and 4 are checklists noting which additional schedules may be required. As a board member it is important to know and understand the additional schedules that may be required to ensure you are meeting your fiduciary responsibility. These schedules are lettered A through R and should be attached if indicated here. This blog is an original work of the attributed author and is shared with permission via Foundant Technologies’ website for informative purposes only as part of our educational content in the philanthropic sector. The views, thoughts, and opinions expressed in this text belong solely to the author and do not necessarily reflect Foundant’s stance on this topic.

Step 3: Operational Costs

It allows you to see how the organization uses its funding to advance the mission and allocate resources. Generally, nonprofits try to limit their operating expenses as much as possible to lower their overhead. It’s important to find the balance between reducing overhead to fund your mission and ensuring you dedicate enough funding to your operating activities to continue growing and expanding your organization. The cherry on top is that this report can help your organization file your annual Form 990 report.

When it comes to bookkeeping for non-profits, many of the processes remain the same as in the for-profit world; however, differences in terminology will apply when managing a charitable organization’s books. Your nonprofit accountant or accounting team has likely put one together in the past. This can help determine your capacity for growth and if your nonprofit is ready to take on new financial initiatives. It can also be used to help spot potential or current financial concerns. Program expenses (or program services expenses) are the amounts directly incurred by the nonprofit in carrying out its programs. For instance, if a nonprofit has three main programs, then each of the three programs will be listed along with each program’s expenses.


Recently, the Financial Accounting Standard Board decided to let nonprofits use the simpler direct method, without also having to show the indirect method. This statement shows Navigating Law Firm Bookkeeping: Exploring Industry-Specific Insights the value of your organization – how it is positioned financially. It shows what you own (assets), what you owe (liabilities), and the difference between them (net assets).

  • The main difference is that in an SOP, what is left after you subtract the liabilities from the assets is called the net assets.
  • A listing of the titles of the general ledger accounts is known as the chart of accounts.
  • Many misconceptions exist in this area, but to deliver accurate, transparent financial statements and returns, you must have a comprehensive understanding of the nonprofit accounting process.
  • Variance analysis can provide useful insight into how we have been using our resources.
  • Warren Averett is a top accounting firm providing audit, tax, accounting and consulting services to companies across the Southeast.
  • Doing so runs the risk of upsetting donors and can cause issues with the audit process.

These statements can be considered analogous to a for-profit organization’s income statement. Nonprofit organizations, by definition, operate with the principle of focusing on accountability, not profitability. Any revenue of income left over after all of the business expenses are paid is required to be put back into the organization for the purpose of funding the mission. This is important for nonprofits to keep both their nonprofit or charitable designation from the state they operate and also their tax-exempt status which is monitored by the Internal Revenue Service (IRS). This type of accounting system is typically a series of general ledgers, or funds, which enables the organization to track revenue and expenses to a single point of origin. Theoretically, each fund has a separate budget, and this separation in the books ensures the nonprofit is using grants and donations solely for permitted purposes.

What are the Components of a Non-profit Income Statement?

For-profits (just as the name implies) focus their energy and efforts on turning a profit. Nonprofits and for-profits differ significantly in many ways, from the part they play in the community to the way they approach their finances. Understanding how accounting for nonprofits differs from for-profits gives you better insight into how organizations like yours prioritize finances. A quicker way to point our board members to this relationship (the current ratio) is to show them a graphic that compares the relative size of the two numbers.

  • Consider working with a nonprofit accounting expert at JFW Accounting Service today to get your entity on the right financial track.
  • These reports collectively provide the financial insights your nonprofit needs to thrive.
  • Much like the statement of financial position, the statement of activities must distinguish restricted funds from unrestricted funds.
  • It now focuses on the existence or absence of donor imposed restrictions instead of the types of restrictions.
  • Be sure to look up your own state’s policies to find out more about specific regulations.
  • Taking into consideration the previous years can make you understand the position you hold in the market better.

When the award letter is received, FAN records the full $60,000 as grant income With Donor Restrictions on the income statement. A portion of the grant will be released from restriction in each year of the three-year grant period. The sample income statement for 2018 shows $20,000 being released from restriction, while the remaining $40,000 remains in the With Donor Restrictions column. The same release of $20,000 will occur in future years two and three of the grant award. While the goal of a nonprofit organization is not to earn a profit, these organizations do make money. Excess revenue can be used to fund further programs or saved as a reserve for future expenses or to offset periods where the expenses exceeded income and there is a shortfall or loss.

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