What Is a Nonprofit Balance Sheet?

Nonprofits have a primary responsibility to the Internal Revenue Service (IRS) and their donors when filing and sharing financial statements. Organizations must follow basic accounting practices when filing these statements and find ways to share these details in ways donors can understand. Nonprofit financial statements aren’t just helpful – they’re required by the IRS. In this guide, you’ll learn about the four key statements every nonprofit needs, how to prepare them, and which financial ratios are most helpful. Whenever your nonprofit needs to provide a balance sheet, ensure your team updates it to reflect your organization’s current financial standing.

Restricted and unrestricted funds

• One of the very common mistakes which are observed in the financial statements of the nonprofits is that restricted and unrestricted funds are not segregated.
• But many times they don’t fully understand what the report is, and what they’re looking for is something that’s not actually in the report.
• Historical cost represents the original purchase price of the asset, while fair market value is the estimated price that the asset would fetch in the open market.
• The Statement of Financial Position (SOFP) is the correct nonprofit term for the balance sheet.

For more information about how to create a budget, check out accounting services for nonprofit organizations the National Council of Nonprofits guide to Budgeting for Nonprofits. They need an organized system that makes sure purchases are ordered, budgeted for, and fulfilled properly from the get go. Once you’ve got a bookkeeping system and a bank account in place, you need some way of making sure the information in both of those systems lines up.

Templates

Here’s an example of Wellington Zoo’s annual report (page 45) that includes its statement of financial position or balance sheet. This section highlights the sources of revenue and support, as well as the expenses incurred by the organization. It gives insight into the organization’s financial performance and whether it is generating enough revenue to cover its expenses. A good budget can act like a roadmap for a nonprofit, determining where and when the organization will deploy its resources, and whether it’s on the right track financially. Don’t use your personal bank account to receive, hold or disburse money for your nonprofit.

Sample Programs

Nonprofit financial statements are reports that provide an overview of a nonprofit organization’s financial health. They are prepared based on Generally Accepted Accounting Principles (GAAP) and help organizations make resource allocation and other strategic decisions. They also play a crucial role in ensuring nonprofits remain accountable to stakeholders.

Investing Activities

Contact us if you have any questions about any of our free templates for nonprofit organizations. By leveraging these free non-profit templates and tools, you can improve your organizational processes, increase your fundraising effectiveness, and better manage your programs. Explore our offerings and find the resources that will empower your nonprofit to thrive and make a lasting difference. In this guide, we’ll teach you the core components of the nonprofit statement of financial position and how to put one together in a way that’s as painless as possible. We’ve also provided an example nonprofit statement of financial position to guide you.

• The IRS 990 doesn’t really qualify, since it’s done once per year and first-and-foremost as a tax compliance document.
• This financial statement provides a snapshot of a company’s financial position, allowing decision makers to assess the company’s liquidity and financial health.
• A balance sheet is a financial statement that provides a snapshot of a non-profit organization’s financial health at a specific point in time.
• Here, we break down the components of a nonprofit balance sheet, followed by an example of a nonprofit with a $1 million budget, a 10,000-square-foot building, and a staff of 6 full-time employees.
• It provides information about the organization’s capital expenditures and acquisitions.
• However, some of those assets may be restricted for a particular purpose and not available to pay general operating expenses.
• Once you’ve got your bookkeeping system setup and have started generating financial statements, the final piece of the nonprofit accounting puzzle is getting your tax obligations straight.

In this framework, money going out is an expense and money coming in is income. Contact us if you have any questions about our free simple non-profit budget template or any other budget template for non-profit organizations. Having a proactive system for tracking the movement of funds during the year is the most difficult piece of reporting. Nobody wants to dig through the proverbial “shoebox” of receipts come reporting time.

• Depending on your jurisdiction, you may need to file your financial statements with regulatory bodies, especially if you’re a registered charity.
• Analyzing the assets of a non-profit organization is crucial for understanding its financial health and liquidity.
• They include items such as accounts payable, accrued expenses, and short-term loans.
• The statement of cash flows details the organization’s cash inflows and outflows from operating activities, investing activities, and financing activities.
• The ultimate guide to selecting the best accounting and financial management software for your nonprofit.

Understanding the Balance Sheet

Many nonprofits recognize that making the balance sheet available helps keep them transparent with donors, grant makers, and stakeholders, as well as facilitating compliance with financial regulations. The primary difference between a nonprofit balance sheet and a for-profit one is in the equity section. Restricted funds are allocated for specific purposes dictated by your donors, while unrestricted funds can be used for general operations. The balance sheet details your assets, liabilities, and net assets, the basic ingredients for evaluating financial stability and guiding future planning. They’re calculated by subtracting your total liabilities from your total assets, which should be listed in the other two sections of your balance sheet. Partner with the nonprofit accountants at Jitasa to create and interpret your statement of financial position.

By analyzing key components and interpreting financial ratios, stakeholders can gain valuable insights into the organization’s liquidity, debt obligations, and net asset composition. This article provides a comprehensive overview of key considerations when analyzing a non-profit organization’s balance sheet. The Statement of Cash Flows is a financial statement that shows the sources and uses of cash for a specific period. It helps stakeholders understand how a company generates and uses cash to support its operations, investments, and financing https://nerdbot.com/2025/06/10/the-key-benefits-of-accounting-services-for-nonprofit-organizations/ activities.