Sample Financial Statements for Nonprofit Organizations

While the goal of a nonprofit isn’t to turn a profit, if you don’t bring in more than you spend, you won’t be able to survive. And a little “profit” helps build your operating reserves to help you survive a slow-fundraising quarter or unexpected expenses. It includes donations, grants, fundraising, earned revenue, government funding, and special events. Let’s take a look at how each of the financial statements we discussed can provide value for your organization. Functional classifications include program costs, management and general costs, and fundraising costs.

Net Assets

• These ratios provide a snapshot of the organization’s liquidity, long-term solvency, and operational efficiency, respectively.
• Having a high level of financial transparency plays a key role in the sustainability and growth of any nonprofit organization.
• Secondly, the statement provides transparency and accountability to the organization’s stakeholders, such as donors, board members, and the general public.
• The final figure offers a snapshot of your nonprofit’s financial trajectory, guiding decisions for the next reporting period.
• With these goals in mind, you can look at each of your financial statements and see whether or not you’re on track to achieve them.
• Yes, nonprofits often undergo audits to ensure accuracy and compliance, especially when required by law or grant agreements.

A Statement of Activities shows whether an organization made a profit or a loss during a period of time. It is a financial snapshot that can be used to track the organization’s financial progress. Generally, nonprofits will report all their revenue into two categories – without donor restrictions and with donor restrictions.

Nonprofit Financial Statements: The Complete Guide with Examples

• Overall, nonprofit financial statements provide a snapshot of your organization’s current financial standing so you can better plan for your nonprofit’s future.
• First, it helps nonprofit leaders make informed strategic decisions by showing where funds are coming from and how they are being spent.
• This includes cash received from customers, cash paid to suppliers and employees, and other operating cash flows.
• The primary purpose of the statement of activities is to satisfy regulatory requirements, such as Generally Accepted Accounting Principles (GAAP) and Form 990 for the IRS.
• These donations can range from small, recurring monthly contributions to large one-time gifts.

They provide insight into the organization’s overall financial health and stability. Understanding the composition of net assets is crucial for stakeholders to assess an organization’s financial position. Understanding and effectively utilizing the Statement of Activities is crucial for nonprofit organizations to achieve financial stability and fulfill their mission.

Understand the purpose of the statement of activities

Your nonprofit works to accomplish its mission, and when it comes to communicating that to donors and external stakeholders, no document is as helpful as a statement of activities. Analyze ratios such as the current ratio (current assets divided by The Key Benefits of Accounting Services for Nonprofit Organizations current liabilities), the debt-to-equity ratio, and the operating margin to assess financial health. These ratios provide a snapshot of the organization’s liquidity, long-term solvency, and operational efficiency, respectively.

Understanding Nonprofit Statements of Activities

A Statement of Activities is a financial statement commonly used by nonprofit organizations. In summary, the net assets section of nonprofit financial statements provides valuable information about the organization’s financial health and the availability of funds. Understanding the different categories of net assets, including unrestricted and restricted, is essential for effective financial management and decision-making. 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. This method records revenue and expenses in accordance with nonprofit accounting standards.

7 Restricted and unrestricted funds

In this article, we focus on one of the financial statements your nonprofit should be generating regularly and using to assess performance, growth potential, and sustainability. This distinction helps organizations track and report how they are meeting donor expectations, ensuring transparency in how funds are allocated and spent. By clearly separating these categories in the Statement of Activities, nonprofits can demonstrate their commitment to honoring donor intent and maintaining financial integrity. Revenues represent the total income a nonprofit organization receives from various sources, such as donations, grants, program fees, and investment returns, during a specific period.