But nonprofit revenue can have unique complexities and restrictions compared to for-profit businesses. Beyond just earned income, charitable nonprofits rely on diverse sources like donations, grants, government contracts, investments, and fundraising/events, among others. Each revenue stream has its own accounting treatments, trailing requirements, and financial impacts. While a template can make this job easier, it’s recommended to seek the help of an accountant to ensure accuracy. A well-prepared statement of financial position can offer insights into your nonprofit’s financial health and help your organization stay compliant with donors and regulations. This document allows you to properly allocate resources, make smarter financial decisions, and stay accountable to stakeholders.

Key Differences from For-Profit Balance Sheets

Compiling an accurate balance sheet ensures your organization is equipped to file Form 990 each year, conduct smooth audits, apply for grants, and, ultimately, assess its financial health. One of the main financial statements nonprofits develop is a nonprofit balance sheet. To get you up to speed, we’ll review the basics of this report, why it’s important, and how to interpret it so your organization can maximize this data. While the process can be tedious, compiling nonprofit financial statements allows your organization to evaluate its financial standing and stay accountable to stakeholders. These documents help you use resources effectively to fulfill your nonprofit’s mission.

Where to find a nonprofit’s balance sheet?

• The income statement can be prepared on a monthly, quarterly, or yearly basis.
• For your nonprofit to expand its operations and make a greater impact over time, it needs to be financially healthy and sustainable.
• Organizations must follow basic accounting practices when filing these statements and find ways to share these details in ways donors can understand.
• This free nonprofit and free NGO templates download is especially helpful for new organizations just starting out to get a jump start on their board structure.
• In addition to the common size analysis, analysts may also use other methods such as ratio analysis and trend ratios to further analyze the organization’s financial trends and performance.
• When comparing a nonprofit organization’s balance sheet to a for-profit one, there are several key distinctions to consider.

They are intended for specific purposes, such as funding a particular program or project. While there are similarities in the basic principles of accounting, nonprofit financial statements focus on accountability to stakeholders rather than profitability. For instance, nonprofits report net assets rather than equity and classify these assets based on restrictions (unrestricted, temporarily restricted, and permanently restricted). These documents provide an overview of the nonprofit’s sources of income, how funds are spent, the programs and services offered, and the organization’s overall financial health. Nonprofit online bookkeeping financial statements demonstrate transparency and accountability to the board, donors, regulatory agencies, and the general public. Small and midsize nonprofit organizations typically do not have net assets that are restricted permanently, such as endowments, and it is usually not advisable for them to do so.

How do nonprofits pay their employees?

If you’re looking for an easier way to get accurate and on-time financial reports, consider outsourcing your nonprofit bookkeeping and accounting to The Charity CFO. Nonprofits should include balance sheets in their organization’s annual reports and when filing Form 990 nonprofit balance sheet with the IRS. It’s best to hire an in-staff or freelance accountant to create these reports, but if funds are unavailable, we hope this article helps you get started.

• This includes documenting donor restrictions, tracking the use of funds, and reporting on the status of these assets in financial statements.
• When you’re a Pro, you’re able to pick up tax filing, consultation, and bookkeeping jobs on our platform while maintaining your flexibility.
• There are several nonprofit accounting resources you can use to assess your financial situation with regard to growth potential, and one of the best is your statement of financial position.
• A well-maintained balance sheet, combined with regular financial reviews, strengthens a nonprofit’s ability to thrive and serve its community effectively.
• The Balance Sheet shows the value of assets, liabilities, and capital funds at the end of the accounting year of the organisation on a particular date.

The net assets (also called equity, capital, retained earnings, or fund balance) represent the sum of all the annual surpluses or deficits that an organization has accumulated over its entire history. By analyzing the balance sheet, stakeholders can determine the company’s liquidity, profitability, and solvency. This information is essential for making informed decisions about investments, loans, and overall business strategies. A strong balance sheet indicates a healthy and stable organization, while a weak one may signify potential risks or challenges. Without knowing your nonprofit’s baseline, it’s difficult to determine whether its financial health is stable. Compare multiple balance sheets to consider trends over time and identify the norm for your nonprofit.

• One major variance is that a nonprofit’s balance sheet is also known as a nonprofit statement of financial position.
• Ideally, you would have far more assets without restrictions than with restrictions.
• If your nonprofit operation becomes unviable, your remaining net assets will be distributed according to laws governing the nonprofit sector.
• Save time with automated accounting—ideal for individuals and small businesses.
• Understanding a balance sheet is not solely for the CFO or accountant; it’s for everyone who cares about the mission.

Currencycloud stops safeguarding your funds when the money has been paid out of your account to your beneficiary’s account. The Balance Sheet shows the actual value of Assets, Liabilities, and Capital Funds of the organisation. The surplus/deficit ascertained from Income and Expenditure A/c is added/deducted from the Capital Fund as the case may be. Other items https://likeahouse.org/notes-receivable-are-promissory-notes-liquid/ added to Capital Fund are the capitalized events or transactions like Legacies, Entrance fees, and Membership fees. Some funds may be created other than Capital Fund, like Sports Fund, Building Fund, etc., to meet the specific requirement or the requirements of donors/contributors. Contact us if you have any questions about our free simple non-profit budget template or any other budget template for non-profit organizations.