One of the key financial documents used by these organizations is the Statement of Activities. This statement provides a detailed overview of revenues and expenses, offering insights into how funds are utilized and the overall financial health of the organization. The Nonprofit Statement of Activities is an essential financial document that offers a comprehensive view of an organization’s financial status.

Understanding nonprofit financial statements: 4 key reports

• This information can help you identify potential problems early on and solve them before they become larger financial issues.
• The nonprofit statement of activities, also known as the income statement or the statement of revenues and expenses, is a financial report that shows the organization’s revenues, expenses, gains, and losses.
• Such analysis is indispensable for strategic planning and ensuring that the organization continues to effectively fulfill its mission.
• Liabilities include things like salaries, debt, and grants to other organizations.
• The Statement of Financial Position provides a snapshot of your nonprofit’s financial status at a specific moment in time.

Nonprofits can use this report to file Form 990 with the IRS and provide donors with transparency and trust in the organization. Restricted Revenue shows funds with donor-placed restrictions on how or when you can spend the money. You can include all restricted funds together or segment them by donation type. It includes donations, grants, fundraising, earned revenue, government funding, and special events.

What Is A Statement of Activities for Nonprofits?

It also helps determine whether a company can obtain enough funding to support its operations and identify what has to change (rising income, falling costs, or both) to fund critical projects. It helps identify certain programs that cost more and have a low success rate. Conversely, if a project does well, the organization can invest more in it and apply the insights to other projects. 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.

Accounting & Financial

It demonstrates how the organization is utilizing its resources to achieve its mission and goals. Such analysis is indispensable for strategic planning and ensuring that the organization continues to effectively fulfill its mission. These distinctions highlight the different financial dynamics and objectives between nonprofit organizations and for-profit businesses. Understanding these differences is essential for anyone involved in the financial management, oversight, or analysis of a nonprofit entity. The Statement of Activities in nonprofit accounting is akin to an income statement used in for-profit businesses, but with some key distinctions that reflect the unique goals and structure of nonprofits. Unlike for-profit businesses that aim to maximize profits for shareholders, nonprofits focus on fulfilling their mission while responsibly managing their finances.

• Columns are included to report data for each class of net assets – without donor restrictions, with donor restrictions, and total.
• Through a statement of activities, leadership can determine what programs are working, and where to invest future resources.
• The Statement of Cash Flows tracks the movement of cash in and out of your organization during a given period, typically the fiscal year.
• It automates and facilitates these comparisons, allowing for more efficient monitoring and decision-making.
• While your statement of activities shows the sustainability of your nonprofit, your statement of cash flows shows how money moves in and out of your organization.
• Within both levels, information is given indicating the income and expenses of the nonprofit.

So it’s very important that you learn to read the IRS 990 and understand what it says about the financial health and governance of your organization. The definition of a financial statement is a simple report that can be pulled together monthly (or as-needed) to give you a view of your financial health. This report will show them which of your activities brought cash into your operation during the period and which expenses ate up large chunks of money.

Its significance to nonprofit organizations lies in its transparency into funding sources, the usage of these funds, and the organization’s budgetary operations. Sometimes, revenue earned by nonprofit organizations has restrictions placed on it by the revenue source. For example, granting organizations may require the funds provided to be dedicated toward a specific service or purpose. The Statement of Cash Flows shows exactly when cash actually leaves or https://nerdbot.com/2025/06/10/the-key-benefits-of-accounting-services-for-nonprofit-organizations/ enters your organization.

Relying solely on spreadsheets and figures may not fully capture the organization’s achievements and challenges. If your nonprofit operates multiple programs or projects, it is important to allocate your expenses and revenues accordingly. For effective accounting period review, allocate revenues and expenses in separate columns to accurately assess the financial performance of each program or service. This allows you to track and assess the financial performance of each initiative separately. The Statement of Activities tracks your nonprofit’s accounting services for nonprofit organizations income and expenses, showing financial performance over time. The Statement of Financial Position, or Balance Sheet, shows what your nonprofit owns and owes at a specific moment.

Management and General Expenses

Websites like GuideStar also look at these reports when choosing which nonprofit to award their platinum and gold seals of approval. Your nonprofit’s Statement of Activities must include your organization’s revenue, expenses, and net assets. Simply, it reports your organization’s revenue and expenses during a specific period and the difference between them. The Statement of Activities is the Income Statement of a nonprofit organization.