The nonprofit Statement of Activities is one of the main financial statements of a nonprofit organization.
Key to Fulfilling Mission
Being a nonprofit does not mean, I don’t really care abut my finances. Understanding your finances and resources is extremely important to a nonprofit, because it provides insight as to whether or not you have the required resources to fulfill your mission. Today we are going to examine and learn how to understand your Statement of Activities, or Statement of Income and Expenses.
Segregates Financial Activity
The nonprofit Statement of Activities is one of the main financial statements of a nonprofit organization. Unlike a for profit income and expense report, a statement of activities must segregate financial activity by revenue classes to identify funds received without donor restrictions and funds with donor restrictions.
Shows Sources of Funds
The revenue section contains a breakdown of the major sources of revenue, such as contributions, program fees, membership dues, grants, investment income, and amounts released from donor restrictions.
Expenses Section Identifies Functional Areas
Expenses are reported in categories that identify specific functional areas, such as mission based programs, and support services including management and general and fundraising.
It is important for a nonprofit to easily generate this statement to measure if each of their mission based programs has the resources necessary to operate efficiently and can be sustainable for the organization. Without the proper matching of revenue and expenses, nonprofit management cannot generate the reports needed for funding sources, IRS reporting, and more importantly they will not be able to make informed decisions on their organization’s financial outlook.
FastFund Accounting automatically generates your Statement of Activities with the proper segregation of revenue classes and expense functional categories. You don’t have to jump through hoops and spend countless hours manipulating your financial data from an accounting system that doesn’t automatically create this essential financial statement for your nonprofit.
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