Not-for-profit entities Topic 958: Presentation of financial statements of Not-for-Profit Entities

It could be based on time — for example, a grant that is restricted to only a two-year program — or this could refer to endowment funds, where the principal can’t be spent, only the investment income. Out of the four most common financial statements in a nonprofit, the Statement of Activities, also known as the Profit & Loss (P&L), is the broadest. The P&L covers all the organization’s programmatic, fundraising, and bookkeeping and payroll services administrative expenses incurred during the period.

Learning Accounting

It summarizes your revenues and expenses for a specific period and allows both your organization and stakeholders to understand how you’re managing your resources. The nonprofit Statement of Financial Position, also known as a balance sheet, provides information as of a specific date about your organization’s financial health. This statement offers financial insights through your organization’s liquidity and financial flexibility—represented as assets and liabilities. A listing of the accounts available in the accounting system in which to record entries. The chart of accounts consists of balance sheet accounts (assets, liabilities, stockholders’ equity) and income statement accounts (revenues, expenses, gains, losses).

Journeying Down the Financial What-if Rabbit Hole

The operating grants and contributions are used to finance operations of specific function/program and should be reported separately from capital grants and contributions. Charges for services are program revenues of a function/program that assess the charge even if the money is required to be spent on a different function/program. Conversely, a decrease in net assets, particularly unrestricted ones, can be a warning sign of financial distress, indicating that the nonprofit may be spending more than it is taking in.

What is the Cash Flow Statement?

Recovery Connect scaled their nonprofit with Instrumentl, streamlining grant management and eliminating inefficiencies. 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. Instrumentl is the all-in-one grant management tool for nonprofits and consultants who want to find and win more grants without the stress unearned revenue of juggling grant work through disparate tools and sticky notes. Keep in mind that the precision and accuracy of these figures are essential for a clear understanding of your organization’s financial health and operations. On the other hand, $311,227 corporate, foundation, and individual giving has restrictions. This means that the Red Cross may only use those donations for purposes specifically outlined by the donor.

The Statement of Activities is a fundamental document for nonprofit organizations, serving as a financial roadmap that outlines the inflows and outflows of resources. At its core, this statement is designed to provide a clear picture of the organization’s financial performance over a specific period, typically a fiscal year. It is akin to the income statement used by for-profit entities but tailored to meet the unique needs of nonprofit accounting. The statement of activities for your nonprofit organization provides an overview of the organization’s major activities and financial performance. The report can be used to improve fund-raising efforts by highlighting the different ways in which donations can be used to support your mission. By understanding the various sources of revenue and expenses, you can target potential donors and make more informed decisions about how to allocate resources.

The statement of activities is also important for nonprofits because it can help companies plan their resources and track their progress. Nonprofit organizations rely heavily on financial reports to make informed decisions about their operations. A statement of activities is a financial document nonprofits use to report performance statement of activities example over a defined period.

Revenues, gains, other support, and releases from donor restrictions

This guide teaches the basics of reading and understanding a nonprofit Statement of Activities. Although both documents hold a lot of the same information, the statement of activities presents nonprofit financial data in a format suitable for internal management and stakeholders. Be sure to pay attention to the net assets available to your organization under the “without restrictions” column of your statement of activities when analyzing the document for sustainability. If you were to simply subtract the total expenses from total revenue without taking restrictions into account, you might have a false sense of security. Nonprofits must compile an income statement every year to be in accordance with the Generally Accepted Accounting Principles (GAAP). The statement of activities can be incredibly helpful when your nonprofit is analyzing its finances and trying to determine where those hard-earned fundraising dollars go.

Use This Accounting Template To…

• This classification is critical as it helps stakeholders understand the constraints on the organization’s resources and how these constraints affect the nonprofit’s capacity to utilize funds for various purposes.
• A nonprofit organization is driven more by a mission or a service than financial success.
• For purposes of illustration, assume that ABC Foundation has $291,800 (discounted to present value) of pledges for capital additions, of which $45,000 is classified as current.
• This report is important for nonprofit organizations because it helps them assess their performance and identify areas where they need to improve.
• Since the statement of activities distinguishes unrestricted funds and restricted funds, you can get an idea of just how flexible your funding streams are.

Nonprofits must also provide a functional expense analysis, and many organizations choose to meet this requirement using a nonprofit Statement of Functional Expenses. If your nonprofit organization does not have permanently restricted assets this statement of activities form was designed for you. The more common revenue and expense categories are preprinted along with lines on which to enter your organization’s amounts. Let this form save you time while you learn about this important financial statement.

• One of the most important reports in nonprofit accounting is the statement of activities.
• Wellington Zoo’s annual report uses its audited financial statements (from page 45) to show the organization’s financial health.
• By understanding how much money an organization has available and where the money is being spent, nonprofits can make informed decisions about their mission, operations, and future.
• Operating expenses are your employees’ salaries and the amount spent on equipment and supplies.
• Find out what it takes for nonprofit finance teams to not only survive but thrive with our Ebook survival guide.
• The nonprofit Statement of Financial Position, also known as a balance sheet, provides information as of a specific date about your organization’s financial health.

How to Use the Statement of Activities to Assess Financial Health and Stability

Since the Form 990 filed by the nonprofit becomes public information, you can learn much about a nonprofit by reading the information on Form 990. The website guidestar.org is a resource one can use to obtain financial (and other) information reported on nonprofits’ Form 990. Under the accrual method of accounting, revenues are reported in the accounting period in which they are earned.