Once that time period lapses or the purpose of the funds is fulfilled, those funds can be used for something else. This is no longer relevant, but it might be useful in looking at historical nonprofit statement of activities. Program services, management expenses, budgeting, financial and administrative fees. Expenses should be reported as major classes of program services and supporting activities.

SERVICES

In other words, it tracks your nonprofit’s financial performance and shows how you’ve https://nerdbot.com/2025/06/10/the-key-benefits-of-accounting-services-for-nonprofit-organizations/ used your funds to support your mission. The Statement of Activities provides detailed information about all the revenues received and expenses incurred by the nonprofit. It differs notably in its presentation of net assets, categorized into unrestricted, temporarily restricted, and permanently restricted funds. The Statement of Activities (SOA) is the correct nonprofit term for the report we may commonly have called the income statement, budget report, profit & loss, income and expense report, etc.

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• Effective use of this statement can thus not only support operational and strategic management but also enhance fundraising efforts by reinforcing the credibility of the organization.
• These articles and related content is the property of The Sage Group plc or its contractors or its licensors (“Sage”).
• If you use cash-based accounting, you’ll only record cash deposited into your bank during the reporting period.
• If your organization has deficits in specific periods, those deficits should be offset by surpluses in other periods.
• Since the gain is outside of the main activity of a business, it is reported as a nonoperating or other revenue on the company’s income statement.

And secondly, if you fail to file a 990 for 3 consecutive years, you’ll automatically lose your tax-exempt status. That means its one financial document every nonprofit needs to be familiar with, even if you’re too small for an audit or struggle to pull together an accurate Statement of Activities every quarter. And because it’s an internal report, you can set it up to show the information however is best for your team.

• This information can be used to make decisions about where to allocate resources and how to improve the organization’s financial health.
• It breaks down each type of spending into specific details, such as credit card payments and employee salaries.
• This practical example and template will help you better understand how the information discussed earlier comes together in a real-life document.
• Each year, nonprofit organizations are required to file Form 990 with the Internal Revenue Service (IRS).
• The Statement of Activities, also known as the income statement, shows the revenues, expenses, and changes in net assets of a nonprofit organization over a specific period.
• Nonprofit accounting can feel complicated for nonprofits without a solid financial background, but there are ways to make filing reports easier.

Crucial Financial Data for Nonprofit Leaders

This statement will analyze all of The Key Benefits of Accounting Services for Nonprofit Organizations a nonprofit’s various assets and liabilities. Budget vs. Actual is an internal report, not part of your audited financial statements. But because the board and leadership are involved in creating a nonprofit budget, it’s often more familiar and more useful on a day-to-day basis.

• It is an important indicator of the organization’s ability to generate cash from its core operations.
• This type of document allows both the Internal Revenue Service and the public to look at the nonprofit’s finances.
• The purpose of the nonprofit statement of activities is to provide details about transactions of the nonprofit entity how those transactions are providing for the organizations various programs and services.
• Encouraging a culture of regular financial review within the team will also help you catch discrepancies and address them promptly.
• This article explores how the platform helped amplify their mission, allowing the team to focus on empowering individuals overcoming substance use disorders and achieving new milestones.
• Under the accrual basis of accounting, revenues are recorded at the time of delivering the service or the merchandise, even if cash is not received at the time of delivery.

This gives you and your stakeholders time to spot discrepancies and correct errors if necessary. This allows you to mitigate risks and seize opportunities, redirecting funds to the initiatives that most effectively advance your mission. Fees paid by your supporters in exchange for privileges, such as newsletters, information, contacts, or access to events. Income generated from services aligned with your mission, such as tuition fees, ticket sales or workshop fees.

What is the Most Common Reporting Period for a Statement of Activities?

They help assess the financial health of the organization and ensure proper management of resources. It is also important for nonprofit organizations to regularly review and update their accounting policies to adapt to changes in the regulatory environment and industry practices. This ensures that the organization’s financial statements remain relevant and compliant with the latest standards and regulations. In this section, it is crucial to pay attention to the debt and accounts payable. These are key indicators of the organization’s financial health and its ability to manage its obligations.

• While they serve as a mechanism to raise funds, they also play a crucial role in raising awareness, building community, and fostering a sense of camaraderie among supporters.
• Finally, they also enable leadership to find potential financial opportunities and ways to address financial concerns.
• In this article, we will explore the key components of nonprofit financial statements and understand their significance in assessing the financial performance and accountability of nonprofit organizations.
• Your board members should have a basic understanding of nonprofit financial statements.
• Under the accrual basis of accounting, the matching is NOT based on the date that the expenses are paid.
• Since a nonprofit organization does not have owners, the third section of the statement of financial position is known as net assets (instead of owner’s equity or stockholders’ equity).

Revenues

In this section, you can find information about the cash generated from the sale of goods or services, as well as any cash payments made for operating expenses such as salaries, rent, and utilities. It also includes cash flows from activities such as grants, donations, and program-related revenue. To present the net assets section in a structured manner, a table can be used to summarize the different categories of net assets, such as unrestricted, temporarily restricted, and permanently restricted. The table should include the dollar amounts for each category and provide a total for the net assets.