Income – Expense = Net Income (Increase in Net Assets) Known as the statement of activities for nonprofits, it shows the following formula: The income statement is the second report every organization needs to provide, whether they are a nonprofit or for-profit. Income Statement (Statement Of Activities) This is the first of two reports every organization (nonprofit and for-profit) needs to provide. When viewing this report, it will quickly show you if your organization owes more than it owns. An easier way to illustrate this is by saying the things you own, minus what you owe, equal your overall worth. What this means is the things you own (assets), equal the debt you have (liability), plus your overall worth (equity). The balance sheet, known as the statement of financial position for nonprofits, illustrates an accounting equation, and shows a snapshot of your organization’s financial health. Balance Sheet (Statement Of Financial Position) Reports can vary from listing contacts to reviewing your transaction history, but there are two specific reports every organization needs to know. When compiled in specific ways, these are referred to as your financial statements. Once those are complete, you can begin to generate reports based on the information you’ve recorded. First, you set up your chart of accounts, and then you use those accounts when recording transactions. Over the past two lessons, we discussed how to begin structuring a nonprofit accounting system.
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