While nonprofits call the difference between their assets and liabilities “net assets,” for-profits refer to this term as “equity,” which represents the ownership interest or stake shareholders have accounting services for nonprofit organizations in the company. Whenever your nonprofit needs to provide a balance sheet, ensure your team updates it to reflect your organization’s current financial standing. Your net assets represent the residual interest in your organization’s assets after subtracting your liabilities. In simpler terms, an organization’s net assets equal their assets minus their liabilities. Generally, nonprofits with higher net assets are financially healthier than those with lower net assets. Similar to LLS, Heifer International has an entire page on its website devoted to sharing its financial information with stakeholders, including a graph that maps out its expenses over the fiscal year.

Conclusion: Financial Statements That Work for You 🚀

Program expenses (or program services expenses) are the amounts directly incurred by the nonprofit in carrying out its programs. For instance, if a nonprofit has three main programs, then each of the three programs will be listed along with each program’s expenses. This table gives a simplified snapshot of your organization’s financial position and activities.

Cheat Sheet for Nonprofit Organizations

These resources cater to different learning styles and needs, ranging from self-study materials to formal courses and professional consulting services. The statement of financial position and the statement of activities are intimately connected and provide a full picture of a nonprofit’s financial status over a period and at a specific point in time, respectively. Liquidity analysis is crucial for evaluating how effectively a nonprofit can meet its short-term financial obligations with its available assets. This aspect of financial analysis focuses on determining the organization’s ability to convert its assets into cash, which is essential for maintaining smooth operations and for responding to any unforeseen challenges.

SERVICES

For-profit companies typically use a single accounting system that tracks all financial transactions. Nonprofit organizations should prepare a nonprofit statement of financial position as part of their strategic planning process. This allows the organization to evaluate its financial position and make informed decisions about its future direction. Nonprofits may need to prepare a nonprofit statement of financial position when seeking loans from banks or other financial institutions. This document can help lenders evaluate the nonprofit’s financial health and determine whether or not to approve the loan. The Board of Directors is responsible for overseeing the nonprofit organization’s management.

These disclosures provide a comprehensive view of the organization’s financial position and help users of the financial statements make informed decisions. In addition to providing detailed insights into your nonprofit’s spending over the past year, the main purpose of the statement of functional expenses is to help you file your organization’s annual tax return. Having a detailed report of your expenditures will make it easier to fill out these sections.

• It ensures that you comply with accounting standards and regulations, such as the Generally Accepted Accounting Principles (GAAP).
• Investing activities are an important part of a nonprofit organization’s financial operations.
• Having a detailed report of your expenditures will make it easier to fill out these sections.
• Unlike for-profits, nonprofits don’t have owners, so instead of “equity,” they have “net assets.” For this reason, the nonprofit balance sheet is often referred to as the Statement of Financial Position.
• Don’t hesitate to reach out to JFW Accounting Services for an expert take on your entity’s finances.

The Role of the Statement of Financial Position in Nonprofits

Preparing accurate and transparent financial statements is essential for building trust with stakeholders and ensuring compliance with regulatory requirements. By following best practices, nonprofits can streamline their financial processes, reduce errors, and improve the reliability of their reports. By keeping your statement of financial position current, you can make informed decisions about your organization’s financial health and communicate accurate information to your stakeholders.

Whether you’re a board member, staff member, or donor, this guide will equip you with the knowledge to https://nerdbot.com/2025/06/10/the-key-benefits-of-accounting-services-for-nonprofit-organizations/ interpret and make informed decisions based on nonprofit financial statements. By following these ten steps, organizations can ensure their nonprofit financial statements accurately reflect their commitment to fiscal responsibility and mission-driven success. The debt to equity ratio measures liquidity and shows how much debt versus revenue is being used. To clarify, the new financial statement presentation of net assets provides improved information for donors, grant makers and other funding sources. The Notes to the Financial Statements provide additional context and explanations for the figures presented in the primary financial statements.