Financial statements of nonprofits

A nonprofit entity issues a somewhat different set of financial statements than the statements issued by a for-profit entity. The financial statements issued by a nonprofit are as follows:

  • Statement of financial position. This is similar to the balance sheet of a for-profit entity, except that a net assets section takes the place of the equity section that a for-profit entity uses. The net assets section breaks out unrestricted net assets, temporarily restricted net assets, and permanently restricted net assets.
  • Statement of activities. This statement quantifies the revenues and expenses of a nonprofit for a reporting period. These revenues and expenses are broken down into the unrestricted, temporarily restricted, and permanently restricted classifications that were referred to earlier for the statement of financial position.
  • Statement of cash flows. This statement contains information about the flows of cash into and out of a nonprofit; in particular, it shows the extent of those nonprofit activities that generate and use cash.
  • Statement of functional expenses. This statement shows how expenses are incurred for each functional area of the business. Functional areas typically include management and administration, fund raising, and programs.

Related Courses

Nonprofit Accounting