Sample Profit And Loss Statement For Nonprofit Organization

But, since auditable nonprofit financial statements, we’ll talk about accrual accounting practices in this article. That means your revenue will also include any donations pledged in the period (whether you collected the cash or not) and any receivables (for services rendered but not yet paid). Like all nonprofit financial statements, the central role of the Statement of Activities is to provide transparency and accountability to your donors and board. But it’s also an excellent tool for understanding just how healthy your business is. An income statement (AKA, the statement of activities) summarizes your organization’s revenue and expenses over a specific time period—quarterly, monthly, yearly, etc. It helps you understand your financial performance and whether your organization is operating out of a surplus or deficit.

How To Read A Statement Of Activities

The Statement of Activities measures the impact of the company’s revenues and expenses and gives users the total change in net assets. The activity reported on this statement covers a specified period of time, usually one month or one year. The nonprofit statement of activities is one of the core accounting documents that your organization creates. It allows you to see how your organization uses its funding to advance its mission and allocate resources. In addition, your income statement can be used to determine how sustainable your organization’s https://nerdbot.com/2025/06/10/the-key-benefits-of-accounting-services-for-nonprofit-organizations/ finances are so you can make informed decisions for the future.

Fundraising Efficiency Ratio

Your financial statements also play a crucial role in maintaining your nonprofit status and passing an independent audit (which you may need to keep your funding). This statement is a great way to stay informed about how cash resources are being used during the fiscal year. When you’re reviewing your cash flow statement, look at the organization’s spending to make sure it aligns with the mission and goals.

University Financial Statement Template

• The notes accompanying financial statements are where the real tea is spilled!
• Calculate all of these expenditures every month as well as an annual amount.
• In other words, it tracks your nonprofit’s financial performance and shows how you’ve used your funds to support your mission.
• So, if a donor pledges to donate $5 per month, you record $5 of income each month when the donation is received, not when it is pledged.

However, if $15,000 of your revenue is restricted, you’re actually $5,000 in the red and should cut expenses to maintain a sustainable organization. The nonprofit statement of activities separates revenue with and without restrictions so that organizations can see the flexibility in their funding in addition to the sheer amount of it. Finally, one of the categories often listed as revenue on your statement of activities is your net assets released from restriction. These are the funds that you are now able to use as unrestricted revenue, although they may have been restricted in the past. Because restrictions on revenue are a key element to be recorded in your statement of activities, let’s explore them a bit further.

These are the costs that aren’t directly tied to your core mission but still part of your overall spending. Examples include interest earned from savings or investments, rent from leasing out property, any special partnerships or royalties, and income from ads or sponsorships. They might also have to handle some of the same taxes as for-profits, as payroll taxes, and local tax rules can vary.

It’s not just about numbers; it’s about telling the story of the organization’s financial journey. Examine the revenue for previous years to identify the average annual profits and compare them with the current year. It will tell you whether the institution is on track with its development objectives or is undergoing a downturn.

• In line with regulatory requirements, Currencycloud safeguards your funds.
• Examples include interest earned from savings or investments, rent from leasing out property, any special partnerships or royalties, and income from ads or sponsorships.
• If a company’s stock is publicly traded, earnings per share must appear on the face of the income statement.
• When you’re reviewing your cash flow statement, look at the organization’s spending to make sure it aligns with the mission and goals.

Expenses in Nonprofit Financial Statements

Nonprofits must file financial statements with the IRS to follow compliance laws, which is not the only reason they should include these activities. Every year, Feeding America puts together a comprehensive annual report that’s as specific as it is well-designed. Apart from all the relevant financial statements, you’ll also find interesting statistics and notable achievements the organization made throughout the year. At times, supporters will give donations stipulating that they can only be used on a specific project or program. The net assets on your statement of financial position are The Key Benefits of Accounting Services for Nonprofit Organizations where your organization must list these restrictions.