Exploring The Statement Of Activities: A Beginner’s Guide

This section outlines the various sources of income your nonprofit receives, such as donations, grants, program service fees, membership dues, and investment income. It is crucial to categorize revenue types to gain insights into the sustainability of funding sources. Earned revenue includes categories such as contract revenue, what are t accounts definition and example program service fees, membership dues, and special event income. Other revenue includes investment income such as unrealized gains and losses. It is crucial to categorize revenue types to make it easier to gain insights into the sustainability of funding sources both for internal purposes and external stakeholders.

• Nonprofits have essentially parallel reports, but because their accounting is different, the reports differ slightly as well.
• By comparing these two documents, you can evaluate your planned versus actual expenses and revenue generation.
• And be the trusted financial partner you can turn to for answers to your questions and expert financial advice.
• Whether you’re a director, volunteer, or board member, you probably didn’t get into nonprofit work for the pleasure of reconciling bank accounts.
• Restricted Revenue shows funds with donor-placed restrictions on how or when you can spend the money.
• Financial statements function as an organized system for reporting on your nonprofit’s resources, so your organization is regularly held accountable to itself, its supporters, and its community.

We can help you modernize and optimize your accounting systems while also taking the time-sucking bookkeeping tasks off of your hands. And be the trusted financial partner you can turn to for answers to your questions and expert financial advice. But if you’re spending more than you bring in for several periods in a row, you’re headed for trouble. Donated Materials – value of materials that have been donated to your nonprofit. Harold Averkamp (CPA, MBA) has worked as a university accounting instructor, accountant, and consultant for more than 25 years.

What is a Nonprofit Statement of Activities?

A Statement of Activities will help nonprofits file Form 990 with the IRS and provide needed transparency to donors, foundations, and corporations. Websites like GuideStar will also use this report to share how your organization uses revenue. A Statement of Activities is one of the four required financial statements a nonprofit must file. This statement is the equivalent of a for-profit’s income statement. Simply, it reports your organization’s revenue and expenses during a specific period and the difference between them.

• The below glimpse is taken from the same financial report of the Code for Science & Society that we shared earlier.
• Its detailed breakdown offers valuable insights into the organization’s financial performance and health.
• These are the funds that you are now able to use as unrestricted revenue, although they may have been restricted in the past.
• It’s best to treat this “rule” as a guideline—when reviewing your statement of functional expenses, look for areas where you could reduce overhead spending and put more funding toward your programs in the future.
• Nonprofit financial statements are useful to donors and contributors to show that your nonprofit has efficiently allocated resources.
• If you use cash-based accounting, you’ll only record cash deposited into your bank during the reporting period.

The other thing that FASB 117 requires of nonprofit entities is reporting of expenses by functional classification. This means that a nonprofit statement of activities should have at least two categories. Once the total expenses are subtracted from the total collected revenue, the result is a change in Net Assets.

But don’t fret – although it sounds complicated, these standard financial statements are easy to compile with the right tools and guidance. In this article, we’ll walk you through the four types of statements and show you some examples of how other nonprofits handle their financial statements. Understanding and effectively utilizing the Statement of Activities is crucial for nonprofit organizations to achieve financial stability and fulfill their mission.

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These payments may have been made with cash, credit, or even through in-kind donations. It is important to see the distinction between restricted and unrestricted as only unrestricted revenue can be used to pay bills. When a restriction is satisfied, those monies are moved from restricted to unrestricted and then used for expenses.

Change In Net Assets On Statement Of Activities

Expenses in the Statement of Activities include all money flowing out of your organization. The first step in reading a Statement of Activities is to understand its purpose. Nonprofits use this report to file Form 990 with the Internal Revenue Service (IRS). If you’re ready for an accounting partner to ease the burden of monthly bookkeeping and accounting, reach out to us for a free consultation.

Questions To Ask Yourself – Statement of Activities

This can be time-consuming, but it’s not as expensive as hiring an accountant. Contact Jitasa’s team of nonprofit accountants to compile your statement of activities. For-profit accounting departments have a standard set of reports and statements they run to analyze their finances.

What will your CPA look for on your Statement of Activities?

The statement of activities is the nonprofit parallel to the for-profit income statement. Its purpose is to provide detailed information about your organization’s transactions, showing how your expense allocation and revenue generation further your mission. In addition to being a helpful management tool, your financial statements are also essential to maintaining compliance with reporting requirements for tax-exempt organizations. They help hold your nonprofit accountable for its use of resources, ensuring you can maintain your 501(c)(3) status. Each of the four core reports that nonprofits compile annually summarizes your financial data in a different way, providing unique insights into your organization’s current situation.

If you need assistance in creating a Statement of Activities tailored to your nonprofit or have any other accounting and financial concerns, book a free consultation with a Velu CPA expert today. Our dedicated team is here to support you in managing your nonprofit’s finances and achieving long-term sustainability. Grant income refers to funds received from government agencies, foundations, other nonprofits, or other grant-making entities to support specific projects or initiatives. It also provides a basis for regulatory bodies to ascertain whether the organization is maintaining its financial responsibility and operating within the prescribed legal parameters.