NPO Balance Sheets Decoded: From Basic Principles to Strategic Impact

Like most organizations, your nonprofit must decide whether to draft your balance sheet and other key financial statements using either the cash basis or accrual basis accounting. An accurate and transparent nonprofit balance sheet, or nonprofit statement of financial position, is the perfect opportunity to showcase your organization’s financial acumen and build donor trust. The balance sheet is a snapshot of the assets and liabilities of a nonprofit organization at a specific point in time.

Statement of Activities

To present the financial information in a structured manner, nonprofit financial statements often include tables that summarize the data. These tables provide a clear and concise overview of the organization’s assets, liabilities, revenues, and expenses. Another key difference is that a nonprofit must maintain strong financial health to continue its mission-driven work. Examples include the need for accurate financial reporting and a thorough nonprofit audit to ensure the organization’s financial https://greatercollinwood.org/main-benefits-of-accounting-services-for-nonprofit-organizations/ statements are reliable and transparent. Next, classify your assets between current assets and non-current assets, and any restricted funds. Set up an accounting system based on established nonprofit accounting practices that show full accountability for every dollar.

Free Printable Nonprofit Financial Statement Templates

The balance sheet should be represented in terms of uses of funds, such as the difference between restricted versus unrestricted donations. The net assets section of the Statement of Financial Position is an important part of nonprofit financial statements. It provides a clear picture of the organization’s financial health and sustainability. Understanding unrestricted net assets is crucial for nonprofits as it helps determine the availability of funds for various purposes.

• The nonprofit balance sheet is called a picture of your financial and non-financial resources.
• These might be time-restricted, meaning they can only be used after a certain date, or purpose-restricted, designated for particular programs or projects.
• Therefore, cash is typically at the top of the list because it’s already liquid, and property and equipment are at the bottom because you’d have to sell them for them to become liquid.
• Shareholders’ equity is equal to a firm’s total assets minus its total liabilities.
• But nonprofit revenue can have unique complexities and restrictions compared to for-profit businesses.

Nonprofit Financial Statement Examples

Unlike the balance sheet, which shows the company’s financial position at a specific point in time, the Statement of Cash Flows provides insight into the actual cash flow movements over a period of time. If you don’t already use accounting software, it’s time to make the investment. QuickBooks Nonprofit or Aplos simplify bookkeeping and ensure accurate data collection. Many programs offer a nonprofit balance sheet template, so your report will be structured based on GAAP standards for nonprofit financial accounting and reporting. Nonprofits use the statement of activities to review changes to their net assets and show revenue and expenses over the accounting year. In other words, it tracks your nonprofit’s financial performance and shows how you’ve used your funds to support your mission.

Current Liabilities: The Immediate Obligations

Proper formatting ensures that it will be presented in a fashion that complies with nonprofit accounting rules and reporting standards. Some donors commit even further, providing donor-restricted funds that are permanently restricted. These include endowments, where the principal is maintained intact and only the income from accrued interest is utilized. These funds thus ensure long-term stability and growth and form the cornerstone of nonprofit net equity.

• It measures your nonprofit’s assets, liabilities, and net assets in a single document.
• You’ll discover what information each report includes, how to use it, and additional resources for exploring in more depth.
• By following these guidelines, nonprofit organizations can ensure transparency and accuracy in their financial reporting.
• It is completely ok and acceptable to have multiple versions of your financial reports.
• The balance sheet—also called the Statement of Financial Position—serves as a snapshot, providing the most comprehensive picture of an organization’s financial situation.
• Growing organizational accountability through updated balance sheets and clear restricted categorization builds trust among donors, both currently and in the future.

Non Profit Balance Sheet Template

Our services are designed exclusively for nonprofits, so we have lots of experience compiling balance sheets for organizations like yours. Understanding net assets involves a clear grasp of the nonprofit balance sheet, also known Top Benefits of Accounting Services for Nonprofit Organizations You Should Know as a statement of financial position. The balance sheet reflects an organization’s financial health at a specific point in time.