This content is for general information purposes only, and should not be used as a substitute for consultation with professional advisors. This article is for informational purposes only and should not be considered financial advice. The first step in reading a Statement of Activities is to understand its purpose. Stewart Hemingson is an MBA marketing graduate on a mission to make content that converts while being informative and engaging.
Nonprofit Organization Statement of Activities Template
For instance, if your nonprofit has $55,000 in expenses and $65,000 in total revenue, it would appear that your net assets are positive, at $10,000. 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. Nonprofits receive revenue from a number of different sources, all of which are essential to helping the organization pursue its mission. The majority of this revenue will be recorded as gross in your statement of activities. To learn even more about nonprofit financial reporting basics, as well as other fund accounting tips, check out our Accounting Fundamentals Revisited webinar series. The largest nonprofits in the US can accumulate annual contributions totaling billions of dollars, but the statement of activities breaks the figure down into just a few lines.
Understanding Nonprofit Statements of Activities
- For example, among the nonprofit reporting standards laid down by the Financial Accounting Standards Board is FASB 117, which calls for a functional classification of expenses.
- Since nonprofits do not have owners, there is no owner’s equity or stockholders’ equity and there cannot be distributions to owners.
- By comparing program services expenses with program accomplishments and outcomes, nonprofits can assess whether they are achieving their intended impact in a cost-effective manner.
- Investing in a fund accounting software simplifies processes and reporting, making it easy to avoid potential pitfalls.
- By categorizing revenue types, you can easily gain insights into the different funding sources.
The website guidestar.org is a resource one can use to obtain financial (and other) information reported on nonprofits’ Form 990. Under the accrual method of accounting, revenues are reported in the accounting period in which they are earned. In other words, revenues might be earned in an accounting period that is different from the period in which the cash is received. There are many different types of nonprofits, including governmental nonprofits, which we will not address.
Expenses Section Identifies Functional Areas
The report can be used to improve fund-raising efforts by highlighting the different ways in which donations can be used to support your mission. By understanding the various sources of revenue and expenses, you can target potential donors and make more informed decisions about how to allocate resources. 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. The nonprofit statement of activities is a vital financial report that provides a comprehensive view of an organization’s financial performance.
Importance of the Statement in Nonprofit Organizations
Well-kept nonprofit accounting records https://nerdbot.com/2025/06/10/the-key-benefits-of-accounting-services-for-nonprofit-organizations/ help provide insights on the financial health of its own operations and help board members and leadership make strategic decisions. Your nonprofit statement of activities is split into several different sections. Meanwhile, horizontally, it’s split into your organization’s unrestricted and restricted revenue. While for-profits focus on making as much income as possible to make more money for themselves, nonprofit organizations focus instead on how they can raise additional revenue to further their missions. All of a nonprofit’s funds should be reinvested into the organization and its mission.
- Examples of these activities may include receiving contributions of fixed assets or securities, purchasing a building by incurring a mortgage, or obtaining an asset by entering into a capital lease.
- For instance, contributions might include individual donations, corporate sponsorships, and fundraising event proceeds, each of which can be tracked separately to assess their impact.
- To calculate the change in net assets, you subtract net revenue from net expenses.
- By analyzing these costs, nonprofits can identify the most cost-effective fundraising strategies and optimize their efforts to maximize revenue.
- Non-cash gifts such as materials, venues or volunteer labor in support of your campaigns and operations.
- The nonprofit Statement of Activities is one of the main financial statements of a nonprofit organization.
These statements also help financial leaders show where funding is going, and if your organization’s current programs will have long-term fiscal stability. Through a statement of activities, leadership can determine what programs are working, and where to invest future resources. It’s important that you make sure that all relevant staff are well educated in how to prepare a nonprofit statement of activities. It’s essential they understand how the IRS prefers statements to be prepared—the IRS won’t accept forms without all the proper information. Well put together statements are also essential for reassuring donors and other interested parties as to the competency of your organization.
