Statement of Financial Position: Overview of Nonprofit Net Assets

These activities include obtaining loans, issuing bonds, and receiving contributions from donors. The funds raised through financing activities are used to support the organization’s operations and programs. It is important for nonprofit organizations to carefully manage their financing activities statement of financial position non profit to ensure financial stability and sustainability. By effectively managing financing activities, nonprofits can secure the necessary resources to fulfill their mission and serve their beneficiaries. They show how much fuel (or financial resources) the nonprofit has to keep running its programs.

And because it’s an internal report, you can set it up to show the information however is best for your team. Or help you understand why your cash increased even as you lost money that quarter (maybe you dipped into your line of credit to make payroll). The Statement of Cash flows is a relatively simple report that shows if your cash has increased or decreased across 3 segments of your business. The difference between Revenues and Expenses is reported as Change in Net Assets. The 02 segment indicates the specific department, program, or grant, and 5000 is the standard expense account number. Before we illustrate a sample statement of activities, let’s take a closer look at its components.

Nonprofit organizations require nonprofit accounting

Net assets represent what the organization owns and what it owes, sorted in order of liquidity, or how easily they can be turned into cash. While the statement of activities gives an overall view of financial performance by showing total expenses from total revenue, the statement of functional expenses breaks those numbers down. It details how much is spent on specific areas like programs, administration, and fundraising. This detailed breakdown allows you to see exactly where the money goes, making it easier to record revenue and expenses in a way that shows the true cost of achieving the nonprofit’s mission. Together, these statements help paint a clearer picture of how resources are used.

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 statement of the nonprofit financial position report provides an overview of what an organization is worth and a birds eye view of the health of the organization. Net assets, presented in the nonprofit Statement of Financial Position report, reveal total revenue, assets and liabilities. Here is a blank template that can be used to determine your own nonprofit’s statement of financial position. Doing so can help you better understand which funds are a leverageable part of your operational budget and can be used to take on additional risk, such as expanding the organization.

Why are nonprofit financial statements important?

The Liabilities Section of the Statement of Financial Position provides important information about the financial obligations of a nonprofit organization. It includes the debts and obligations that the organization owes to external parties. By understanding the Liabilities Section, stakeholders can assess the organization’s ability to meet its financial obligations. It’s important to note that nonprofit financial statements are not just for internal use.

• Fixed Assets contain buildings, vehicles, furniture and large equipment and their accumulated depreciation, which helps you determine the net value of your fixed assets.
• Budgets are also used more widely in nonprofits, with multiple budgets typically prepared for each program or grant.
• The statement of activities shows the organization’s revenue and support, expenses, and changes in net assets over a period of time.
• The content on this website is provided “as is;” no representations are made that the content is error-free.
• If your assets increase and your liabilities stay the same, then your net assets will also increase.
• The Statement of Cash flows is a relatively simple report that shows if your cash has increased or decreased across 3 segments of your business.