A Guide to Nonprofit Accounting for Non-Accountants

The surplus or deficit of the year is adjusted to the fund of previous year. It is worth mentioning that the items which have been capitalized during the current year should also be added. Specific funds created for some specific purposes are shown on the liabilities side. For example, Match Fund, Prize Fund etc. are shown on the liabilities side. The amount of this fund is calculated by deducting the amount of liabilities from the value of assets. In this manner we can say that the method of finding out this fund is exactly same that as of calculating the capital of any business enterprise.

The solution you decide on should also allow you to do some form of fund accounting. This means instead of piling your money into one big “cash” account, you’ll need to distinguish between and track separate buckets of money. Donorbox is an affordable and simple-to-use online fundraising tool with powerful fundraising features such as Recurring Donations, Crowdfunding, Peer-to-Peer, Events, Memberships, and more. You can also manage donors, send them automated donation receipts, add offline donations, let donors login and manage their accounts themselves, and more on Donorbox. Save the Children adds these financial statements and a letter from the independent auditor when providing financial reports. On the other hand, they share how these funds support students throughout their education.

Months of Cash on Hand

Funds are related to the day of the event instead of when funds actually arrive. A finance director ensures all of the nonprofit’s financial activities comply with the law and implements internal audits. A finance director has similar responsibilities to a CFO, but they are not part of the top executive team.

Balance sheets are also an excellent way to track how your organization’s financial status has changed in past years. Because this is important only to investors or lenders, you want to be careful to include this only when necessary. For a small business looking for a small amount of funding, you may be able to draft something with your accountant verifying your net worth and/or previous year’s income.

The nonprofit balance sheet, or Statement of Financial Position, shows an organization’s net assets, or equity, by listing out the assets and liabilities as of a certain date. Nonprofits use financial statements to provide transparency and accountability so nonprofit stakeholders, donors, and government agencies can evaluate the organization’s financial health. This is especially important since board members have a fiduciary duty—ensuring that the organization is transparent about finances.

  • Assets of the organization are recorded on the ‘Right-hand side’ and Liabilities on the ‘Left-hand side’.
  • In some states, the articles of incorporation are referred to as a certificate of incorporation or corporate charter.
  • Nonprofit balance sheets give you an overview of your organization’s financial health.
  • Periodic balance sheet analysis, combined with proactive strategies, will keep your organization on the path of sustainable growth and impact.
  • This template can help you craft a letter that will rebuild those important donor relationships.

Use this free excel template to generate a balance sheet for your non profit. This balance sheet template simplifies the balance sheet process by asking plain language questions and then a balanced balance sheet will be generated from those questions. It’s the accumulation of all the surpluses of revenue over expenses (profit) that you’ve seen on your Statement of Activities since the start of your organization. You’ll find your organization’s liabilities organized by current and non-current liabilities on the Statement of Financial Position. On the Statement of Financial Position, your assets break down into current assets, fixed assets, and other assets. The Statement of Financial Position is the Balance Sheet of a nonprofit organization.

Pulling off a fundraising event requires a large amount of planning and preparation. These tools will help your nonprofit plan, schedule, and implement your next fundraising event. A fundraising bingo card is a creative way to boost donor engagement and donations by offering up prizes and other incentives to participants in your next fundraising campaign. This card was created with peer-to-peer fundraising in mind, but the template is customizable to fit a wide variety of needs for your nonprofit. Once you’ve determined that a capital campaign is right for your nonprofit, you’ll need to get organized. There are a number of steps that you have to take to properly plan your capital campaign, and this capital campaign checklist/timeline will help you start the process.

The Nonprofit Statement of Financial Position: What You Need to Know

For the most part, nonprofits can apply to the IRS to become exempt from federal taxes under Section 501. Once you’ve got a bookkeeping system and a bank account in place, you need some way of making sure the information in both of those systems lines up. The letter from the independent auditor highlights their opinion that Save the Children is following all required financial laws. The auditors also make the statements interesting and target them to Save the Children’s English donor base. The inclusion of the text and photographs in Wellington Zoo’s annual report further encourages trust in the organization. Code for Science & Society depicts their financial expenses on this page of their report rather concisely and transparently.

Cash on hand

In addition, this code discusses the circumstances in which a nonprofit organization will be liable for taxes, penalties, and other charges. Donors will be more likely to give if they feel confident that you will use their money wisely. This includes investing in necessary what are some examples of investing activities overhead expenses such as technology, personnel, and other operational costs. Ensuring you take care of overhead expenses before seeking donations also demonstrates good stewardship of funds, which is an important factor in decision-making for potential donors.

Nonprofits must provide this information when filing Form 1023 to apply for 501c3 tax exemption with the Internal Revenue Service (IRS). The Statement of Financial Position is typically part of a monthly financial packet, which may also include a Statement of Cash Flows and a Statement of Activities. Many nonprofit organizations choose to outsource financial reporting to nonprofit accounting experts, like JFW Accounting Services. Because financial statements are the most efficient way to measure financial health, it’s imperative that organizations create a process to produce accurate statements. One type of financial statement that gives readers a detailed view of how the organization is doing is the balance sheet.

General Ledger Accounts and Chart of Accounts

Balance sheets share your nonprofit’s liquidity and how much cash is available and can be an excellent way to track how your organization’s financial status has changed in past years. The information presented on the statement is also required when a nonprofit is applying for tax exemption with the Internal Revenue Service (IRS). In a nonprofit organization, the finance committee typically oversees balance sheets, investments, and returns. The finance committee charter is drafted and approved by the board of directors to enact the financial committee’s authority. Nonprofit recordkeeping can get a bit challenging, so it is worth noting that accounting software exists to help nonprofits record transactions efficiently. A statement of cash flows is a financial statement that provides information about a nonprofit organization’s cash receipts and payments.


As with any financial statement, ensure that all figures are accurate and up to date before submission. Nonprofit accounting is an essential practice in any organization that doesn’t earn revenue. In addition to tracking income and expenses, it also ensures that the organization is using its resources efficiently.

What is a Nonprofit Balance Sheet?

Most nonprofit-friendly accounting software like QuickBooks Aplos or Nonprofit Treasurer will allow you to generate financial statements automatically. Although it’s possible to manually generate financial statements from your ledger or spreadsheet, it takes a ton of accounting knowledge and time to do it right. In most cases, it’s better to let your accounting software or a bookkeeper take care of this step for you. Organizations share these statements to be entirely transparent with their donors. By sharing what funds they collect and how they’re spent, donors can see how their gifts support the nonprofit’s programs and beneficiaries.

Comments are disabled for this post