This includes segregating duties, conducting regular audits, and maintaining proper documentation. By having strong internal controls, nonprofit organizations can minimize the risk of fraud and errors in their financial statements. The default note contains 3 items which are based on trial balance reporting classes and one item for related party amounts which is included on the FinInfo sheet.

Related Excel Templates

This way, your leadership team, board members, and other stakeholders can have a better understanding of how your nonprofit generates and spends its cash from year to year. When preparing a nonprofit profit and loss statement, it’s crucial to include all revenue sources. This comprehensive approach ensures that the organization has a complete view of its financial health. By detailing every income stream, nonprofits can better understand where their funding comes from and identify potential areas for growth.

• There are many moving pieces to success including managing people, fulfilling a purpose, and prioritizing events.
• By the end of the post, you’ll understand each section of the Statement of Activities, how they work, and how they come together to advance the sustainability and growth of your organization.
• The term equity is replaced by the term net assets which is sometimes referred to as accumulated funds.
• It is very important that you have both of them mentioned in your financial statement in word.
• Financial statements allow the board see how well you’re sticking to the budget and if everything follows accounting rules.

The Difference Between an Income Statement and a Nonprofit Balance Sheet

Once that time period lapses or the purpose of the funds is fulfilled, those funds can be used for something else. This is no longer relevant, but it might be useful in looking at historical nonprofit statement of activities. Since their mission isn’t to operate for profit, they don’t need to show a profit statement. They do need to show how they are using their revenues and expenses to achieve their mission. If you haven’t seen one for your organization yet or want to try your hand at compiling one, use our template to get started. Each of these four statements—including the statement of activities—summarizes your organization’s data differently, providing unique, applicable insight you can use to improve your financial management strategy.

Attract more new funds

We have included control totals next to the financial https://nerdbot.com/2025/06/10/the-key-benefits-of-accounting-services-for-nonprofit-organizations/ statements in the profit or loss line. If any of these control totals contain a balance, it indicates that not all income statement accounts have been included in the income statement. You should then review your trial balance data on the TB sheet in order to identify the accounts that may not have been included in the financial statements. The values on the FinInfo sheet will have no bearing on whether the financial statements balance or not – this aspect of the financial statements is entirely determined by the account balances which are included on the TB sheet.

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Printable statements always come in handy whenever you need to look at the financial statements in pdf of your company. This also makes it easier for you to mark anything needed on the paper easily, unlike the one on your electronic devices. Keep in mind that the precision and accuracy of these figures are essential for a clear understanding of your organization’s financial health and operations. For this example, we see the change in net assets between 2021 and 2020 (far right) for operating expenses. As this is a large report, there are additional pages describing the total change in net assets.

Financial Statements of Nonprofits

• Tracking changes in the nonprofit profit and loss statement over time provides valuable insights into financial performance.
• I’m here to help ensure your client has the correct report names in their QuickBooks Online (QBO).
• Thus, there is a drop in the ending balance of the temporarily restricted net assets.
• Do not delete any of the contents on the AFS sheet because you will not be able to recover the data and some of the data may also affect other calculations on this sheet.
• Donated Materials – value of materials that have been donated to your nonprofit.
• The reporting classes included on the Classes sheet should only be used to link the trial balance values on the TB sheet to the financial statements.

And because it’s an internal report, you can set it up to show the information however is best for your team. The budget vs. actual report helps you to easily compare what happened in your business to what you expected to happen. But it won’t show you what happened to the cash you spent, which is generally what board members want to know. The difference between Revenues and Expenses is reported as Change in Net Assets. Tom is a multi-disciplined leader with over a decade of experience in nonprofit operations, technology leadership in government, and over two decades of servant leadership.

What are nonprofit financial statements?

Consistent positive cash flow from operating activities is a good indicator of financial health. Be cautious of relying on cash from investing or financing activities to cover operational expenses, as this may indicate financial instability. This could be a red flag even if other financial statements appear profitable, as cash flow is a critical measure of day-to-day financial health. The Statement of Activities, also known as the Income Statement, outlines the organization’s revenue and expenses over a specific period. It shows how funds were generated and spent, providing a clear picture of financial performance.

Any cash activity that doesn’t fall into the operating, financing, or investing categories, gets summarized in the supplemental section of the statement of cash flows. This part of the statement may include expenses related to interest payments, income taxes, and any non-cash transactions. Nonprofits are unique because the focus is on accountability, not profitability. However, just because there is no rush to distribute profits, a healthy financial position is required for the organization to continue to grow, thrive, and carry out the original mission, or purpose, of the nonprofit. Financial statements are one of the most important tools that the leaders of a nonprofit organization can use to ensure the future health of the entity.