The statement of cash flows (or cash flow statement) is one of the main financial statements (along with the income statement and balance sheet). 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. It provides information on the organization’s financial performance and the sources and uses of funds. The Statement of Activities provides a detailed overview of an organization’s revenue and expenses. It shows how funds are https://nerdbot.com/2025/06/10/the-key-benefits-of-accounting-services-for-nonprofit-organizations/ generated and how they are used to support the organization’s mission and programs.
Revenue Diversification
In this guide, we will break down the different types of financial statements used in the nonprofit world, how to read them, and how you can use them effectively for strategic planning and reporting. Nonprofits need consistent review and reconciliation routines to avoid inaccurate reporting. Engaging in monthly or quarterly reviews, aided by financial management software, The Key Benefits of Accounting Services for Nonprofit Organizations helps identify and rectify discrepancies to ensure the integrity of financial reports. It should show what the nature of individual expenses are in a spreadsheet layout.
Types of expenses on a nonprofit statement of activities
The statement also reports all the revenue generated during the period, regardless of the source. Their expenses prioritize program services as part of their mission, followed by supporting services such as fundraising and indirect costs. The expenses, revenues, and changes in net assets help the management achieve important objectives. Well, revenue that is without donor restrictions refers to funds that the nonprofit can use freely for absolutely any purpose related to the organization’s mission.
Financial Ratios
The Nonprofit Statement of Activities is an essential financial document that offers a comprehensive view of an organization’s financial status. Its significance to nonprofit organizations lies in its transparency into funding sources, the usage of these funds, and the organization’s budgetary operations. Each year, nonprofit organizations are required to file Form 990 with the Internal Revenue Service (IRS).
Action Items for Nonprofit Boards
- Most nonprofits share these statements to be entirely transparent with their donors; often using these statements in their annual or impact reports.
- Even though you don’t have to pay federal taxes, almost all nonprofit organizations (the few exceptions are listed here) must file an IRS Form 990 each year.
- Unrestricted net assets are funds that can be used at the discretion of the organization’s management.
- Overall, nonprofit financial statements play a critical role in promoting transparency, accountability, compliance, and informed decision-making within nonprofit organizations.
- Understanding these differences is essential for anyone involved in the financial management, oversight, or analysis of a nonprofit entity.
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 is a key financial report used by nonprofit organizations to provide an overview of their financial performance over a specific period. It is like an income statement for for-profit businesses but is tailored to the unique needs and structure of nonprofits. Financing activities refer to the activities that involve raising funds for the nonprofit organization.
