Statement of Activities: Reading a Nonprofit Income Statement

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. Program services, management expenses, budgeting, financial and administrative fees. Expenses should be reported as major classes of program services and supporting activities.

Where to find nonprofit financial statements?

This means that the Red Cross may only use those donations for purposes specifically outlined by the donor. The image above demonstrates the American Red Cross’s operating revenue and gains in 2021 and in 2020. In this section, we will present a Nonprofit Statement of Activities example, along with a customizable template.

• The Nonprofit Statement of Activities is an essential financial document that offers a comprehensive view of an organization’s financial status.
• 2025 Federal Funding FAQ’s As federal policies continue to evolve, nonprofit organizations must stay informed about executive actions that may impact their operations, funding, and compliance requirements.
• If you cannot find a nonprofit’s Statement of Activities, you can also ask the organization for a copy.
• Nonprofits are required to provide an analysis of their expenses by nature and function.
• The statement of activities is also important for nonprofits because it can help companies plan their resources and track their progress.
• The path to accurate and effective SOA management is paved with diligence, education, and the strategic use of technology.

Wasn’t total income US$5.154 billion?

Conversely, if a project does well, the organization can invest more in it and apply the insights to other projects. To read and understand a nonprofit financial report, you first need to familiarize yourself with the Statement of Activities. This report breaks down your revenue and expenses by restrictions on how or when you may use them. The Statement of Activities is a great way to see where changes can be made to increase revenue or decrease expenses. Improved financial management can help your nonprofit organization better allocate its resources and improve its overall performance. Improved financial management can help your nonprofit organization better plan for the future, and track its progress over time.

Statement of Cash Flows: How Nonprofits Track Inflow and Outflow of Money

Finally, material amounts of contributed nonfinancial assets should be shown as a separate line item. The following three nonprofits have included financial statements in different ways. Liabilities include things like salaries, debt, and grants to other organizations. When listing your nonprofit’s liabilities, you must list them by when they must be paid and separated by current and long-term liabilities. Sharing these financial statements with donors is one of the best ways to ensure transparency and build trust. Nonprofit financial statements aren’t just helpful – they’re required by the IRS.

• 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.
• Organizations should consider adopting the Unified Chart of Accounts for Nonprofits (UCOA).
• 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.
• A statement of activities is a financial document nonprofits use to report performance over a defined period.
• The best way to create financial statements is to prepare them within your accounting software.
• Conditional contributions come with specific stipulations that must be met before the funds can be recognized as revenue.

Nonprofit Statement of Functional Expenses

These standards provide guidelines for proper financial reporting, including the preparation of the Statement of Activities. Yes, many accounting software platforms have built-in templates and features to generate financial statements automatically. These tools can streamline the process and ensure accuracy in your financial reporting. Revenue includes cash inflow such as donations, grants, membership dues, and income from services or products offered by your nonprofit. Expenses, representing the cost of goods sold and operating expenses, are the costs your nonprofit incurs during its business operations, including program delivery and fundraising activities. A statement of activities shows your organization’s revenue and expenses over a reporting period and relays that your organization is a good steward of donations and working to accomplish its mission.

Designed to let you track unlimited funds and manage your books with ease, MIP Accounting® software offers a simple way to manage intricate financial processes in a single, user-friendly system. 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. Ongoing training in nonprofit accounting principles is indispensable for financial personnel. Dedicating resources to professional development enriches staff’s comprehension of intricate accounting matters, promoting a culture dedicated to precision and adherence to standards. Month-to-month comparisons are crucial for detecting Top Benefits of Accounting Services for Nonprofit Organizations You Should Know trends, anomalies, and areas of concern in your financial activities.

Proper categorization provides stakeholders with insights into how resources are deployed, supporting informed decision-making and promoting financial transparency. The Statement of Activities is one of the core financial statements used in nonprofit accounting. It provides a detailed overview of the organization’s financial transactions over a specific period, typically a fiscal year. This statement records all revenues, gains, expenses, and losses, reflecting the changes in net assets as a result of operational activities.

• A nonprofit statement of activities is a financial statement that shows the  income and expenses of your nonprofit over a period of time.
• Yes, many accounting software platforms have built-in templates and features to generate financial statements automatically.
• Accumulating surplus revenue allows nonprofits to build a financial cushion, safeguarding them against unforeseen expenses or downturns.
• A nonprofit’s expenses usually include all cash flowing out of the organization during the period.
• If donors, grantmakers and regulatory bodies can clearly see how much revenue you generated, where it came from, and how it was spent, that demonstrates responsible financial management, which builds trust.
• The Statement of Activities provides detailed information about all the revenues received and expenses incurred by the nonprofit.

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. In the for-profit world, they call the difference between revenues and expenses net income (or profit). Edited by CPAs for CPAs, it aims to provide accounting and other financial professionals with the https://greatercollinwood.org/main-benefits-of-accounting-services-for-nonprofit-organizations/ information and analysis they need to succeed in today’s business environment.