What are the financial reporting requirements for nonprofit accounting?

A non-profit organization issues a slightly distinctive set of financial reports than the reports generated by a for-profit entity. One of the reports is different from that of non-profit organizations. Although non-profit companies are not legally required to issue annual financial reports. Still, many nonprofit managers realize the added value that annual reports can offer government officials, donors, and employees. The financial statements will explain the achievements of the organization and its effectiveness in managing its benefits and liabilities. Some students need help with international financial assignments. These reports also provide non-profit agencies to adjust their ways of presenting their monetary deals with those observed in the for-profit arena.

IRS Form 990

IRS Form 990 is the most important financial disclosure a non-profit organization will submit, at least according to the national government. Nonprofit organizations that obtain tax-exempt status use Form 990 to provide reports on their operations, income, and expenses to the Internal Revenue Service. As tax-exempt entities, nonprofits do not need to collect taxes on income related to meeting their objectives. However, with other events such as bake sales, thrift sales, and other activities that are not specifically related to the fundraiser’s needs, these organizations are liable for ‘unrelated corporate income tax’.

State reports

Although the national government decides whether or not a charity requires a tax exemption, its local offices grant the entity its non-profit status. States also require nonprofits to disclose their charitable contributions, grant receipts, and administrative expenses to the appropriate office. The standards developed by the American Institute of Certified Public Accountants must be observed by these reports (AICPA). These standards are also known as Commonly Agreed Accounting Principles. That turns financial data into a context familiar to finance experts.

Functional expenses statement

The operating expense statement, as the name suggests, lists expenses by purpose, such as program expenses, operational expenses, and fundraising expenses. This report also lists costs by form, such as wages and pensions, rent and electricity, etc., going one step further. A matrix or table is usually the presentation. The division informs readers of this financial report of the balance of its nonprofit organization in workforce retention and support services, including auditors, board members, or potential grantors. On the one hand, administrative costs should not be unduly disproportionate to the funding of the program.

On the other hand, the funding of organizations could not be reduced to such a low level that trained and skilled workers cannot be hired. Expenses can be in two or three classes at the same time in operation. In this situation, it is necessary to assess a relative breakdown and allocate costs proportionally in each category appropriately.

Statement of financial position

The Budget Status Report for a non-profit organization is close to the income statement for a for-profit corporation. The balance sheet shows your assets, liabilities, and equity (Assets – Liabilities = Equity) in a for-profit company. The word “net assets” replaces “equity” for a nonprofit organization, since the managers of a nonprofit company do not have an ownership interest (Assets – Liabilities = Net Assets) in their agency.

Declaration of activities

Nonprofit organizations use a statement of operations to illustrate the connection between income and expenses rather than income records for for-profit corporations. The discrepancy between sales and expenses reflects a decrease in the organization’s net assets. Non-profit entities have the right to have total sales greater than their costs. Federal and state regulations mandate organizations to redirect these positive improvements in net assets to their fundraising activities.

Statement of cash flows

The cash flow statement shows a picture of income coming in and going out in a given period of time, be it a month, a quarter, a year, or occurring during a defined period on demand. Students also search the Internet for international financial assignment topics. Based on the cash flows of the nonprofit organization, the cash flow statement generally contains up to 3 parts. This indicates the total assets for most nonprofits of:

  • Operational activities: (such as unlimited funds received from fundraising operations or premium cash charges)

  • Investing activities (such as costs or profits attributable to the acquisition or sale of equipment or other long-term assets)

  • Financing activities (such as bond issuance or redemption proceeds)

Annual report

Nonprofits also provide important financial details that are not included in basic financial reports. Join the annual report that will serve to convey in greater depth the economic stability of the company. The material that applies to the annual report may include:

  • Support documents for fundraising or community activities, recognizing that substantial assistance could point to potential economic development, particularly if a new pool of donors has been established.

  • Funding lists and your donation rate

  • The debate of the project or the events of the past year, achievements in advocacy, voluntary assistance, etc.


Here in this article, we have explained the main financial reporting requirements for nonprofit accounting. Following this article should help you better understand this concept.

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