The statement lists the assets and liabilities of the nonprofit and shows the net assets of the organization. These statements are relatively consistent across different types of nonprofit organizations, although some nonprofits may be required to produce additional reports, statements, or disclosures. Understanding the purpose, scope, and intricacies of each type of nonprofit accounting statement is key to success. Many misconceptions exist in this area, but to deliver accurate, transparent financial statements and returns, you must have a comprehensive understanding of the nonprofit accounting process.
- If your nonprofit operates multiple programs or projects, it is important to allocate your expenses and revenues accordingly.
- Within both levels, information is given indicating the income and expenses of the nonprofit.
- Save the Children has made a wise decision to include a statement to address these concerns.
- This information can help you identify potential problems early on and solve them before they become larger financial issues.
- Financial statements also give donors a better understanding of how the organization is doing.
If your nonprofit provides and charges people fees for their services, you can also report this revenue on your Statement of Activities. Organizations can also use this report to educate board members and staff leadership on financial needs and opportunities. Providing this report to the public on the website or annual report can give transparency and instill trust.
Are income statements and Statements of Activities the same?
Statements of activities are useful in assessing the services provided by your organization, its ability to continue those services, and how managers have performed their stewardship responsibilities. A nonprofit statement of activities with functional expenses will list all the programs under the expense section. Expenses might include salaries, office supplies, utilities, and other costs for each program. Sometimes, revenue earned by nonprofit organizations has restrictions placed on it by the revenue source.
When a restriction is satisfied, those monies are moved from restricted to unrestricted and then used for expenses. Reading a Statement of Activities can be helpful for understanding a nonprofit’s overall financial picture. This guide will explain what a Statement of Activities is and the key components in it. Nonprofits will share this information with the IRS, but they may also share this report on their website and annual report to inform donors about the use of funds.
- If a nonprofit has over $100,000 in annual contributions or $250,000 in assets, they are required to file IRS Form 990.
- One of the things you need to do when you’re running a nonprofit organization is to keep track of your financial statements.
- To calculate the change in net assets, you subtract net revenue from net expenses.
- Wellington Zoo’s annual report uses its audited financial statements (from page 45) to show the organization’s financial health.
- Expenses can be summarized into high-level categories or broken into specific accounts or classes.
- Your nonprofit’s Statement of Activities must include your organization’s revenue, expenses, and net assets.
Nonprofits need a Statement of Activities to show how they can afford program and fundraising activities. This report also shares how things can be improved by increasing revenue and decreasing costs. This article will discuss what a statement of activities entails and why nonprofits need them. Your nonprofit Income Statement shows the year-over-year income and spending trends. You should look at your Statement of Activities every month and compare to previous periods. Identify trends and changes in sources of revenue, expenses, and changes to net assets.
At the bottom of the report, there’s a section dedicated to the organization’s net assets. Your organization works hard to raise funds and to use those funds to further your mission. Ensuring your reports are in check will help your nonprofit make the most of your finances moving forward. Let’s dive in to learn more about the specifics of your nonprofit statement of activities.
Types of revenue on a nonprofit statement of activities
These contributions can be in the form of cash, securities, property, or in-kind donations, and they play a significant role in supporting your nonprofit’s activities and programs. The only difference between these terms is that “income statement” is more commonly used by for-profit organizations, while “statement of activities” is more popular among nonprofits. Many nonprofits find that the word “activities” better reflects their focus on mission-driven work and the fact that they bring in revenue from a variety of sources—not just earned income.
Nonprofits use this statement to share what their organization owns and what it owes. If you use accounting software, you’ll need to input all of the information manually. This can be time-consuming, but it’s not as expensive as hiring an accountant. Conversely, a statement of activities with natural classification would only list the expense types, such as salaries, utilities, office supplies, and others. To help you grasp the concept, let’s consider a hypothetical nonprofit organization.
The Structure of a Nonprofit’s Statement of Activities [with Example]
Nonprofits must include natural and functional classifications for all expenses. Organizations will separate these expenses by casualty and theft losses definition programs, fundraising, and management. With each of these, nonprofits include salaries, events, administrative costs, etc.
Just like the tax return is generated using information from the income statements, the information reported on the Statement of Activities is used to complete the annual Form 990. An accurate and timely Form 990 allows nonprofits to protect their nonprofit and tax-exempt statuses, as well as serve as evidence of transparency and financial stability. 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.
As a nonprofit professional she has specialized in fundraising, marketing, event planning, volunteer management, and board development. Any other donations that do not come with a designation can be termed unrestricted funds. You must share this at the beginning of the year and the end of your financial period.