Sample statement of activity of nonprofit organizations
The Income statement (also called the Statement of Activity or the operating statement) describes how the organization has dealt with its income and expenses in a given time period. This is primarily established by understanding how the organization’s net assets have been utilized over time.
This change in net assets is expressed through the general equation:
Revenues – Expenses = Change in Net Assets.
The change in net assets could either reflect a surplus or a deficit.
The income statement of nonprofit organizations is often divided into three categories – unrestricted, temporarily restricted, and permanently restricted funds and all donations are place into any of these three categories depending upon the intent of the donor.
|Operating Statement/Statement of Activities for|
|XYZ Nonprofit organization for Year Ending 20xx|
|Changes in Unrestricted Net Assets:||Unrestricted||Temporarily
|Revenues and Gains:|
|Program Service Revenue:|
|Net Assets Released from Restrictions:|
|Total Revenues, Gains, Other Support: (A)||XXX|
|Total Expenses and Losses: (B)||YYY|
|Increase in Net Assets: (C = A-B)||ZZZ|
|Net Assets as Beginning of Year: (D)|
|Net Assets as End of Year: (C+D)|
Once donated, the donor cannot ask the recipient to return back the funds. However a donor can impose certain terms and conditions of usage for the monies donated at the time of making the donation.
If the donor placed restrictions have not been met, the organization cannot record the donation as revenue but should mention it as a liability. The money can be recorded as revenue only after the donor stipulations are adhered to or the time for such condition expires.
Meaning of terms used in the Income statement
Contributions – Revenues generated from transfer of assets, which are not bound by any conditions or stipulations are recorded under the head ‘contributions’ of the Income statement. It can also include future unconditional promises to transfer cash or other assets to the organization.
Contributions are recorded at fair- market value (FMV) when it is received.
If contributions are to be received in installments, the nonprofit organization can only record the present value of the contribution after discounting the amount received and not the total amount of the contribution that is to be received in installments.
Contributions received in-kind or as service rendered are not generally recorded on the Income Statement.
Program service revenue – While contribution records unconditional revenues, this line item records revenue generated when the nonprofit organization provides some service in exchange for cash or another asset.
Membership dues – These are fees or revenue generated from membership or subscription fee.
Special events revenue – Income generated from special events are recorded separately under this head. A nonprofit organization should record the gross revenue generated from an event and should side wise deduct the related expenses to finally record the net revenue from such special events.
Investment income – This line item records income from the investment portfolio of the organization. Typical income made by a nonprofit organization could include income from dividends on stock or income earned as interest on bonds. As per U.S GAAP (Generally accepted accounting principles) Income from investments should also reflect changes in the market value of the investment.
Program expenses – All expenses incurred and associated with the main mission of the organization.
Fund raising expenses – Expenses incurred on conducting fund raising activities.
Administrative expenses – General, administrative and managerial expenses like – expenses incurred on record keeping, budgeting, compliance and other administrative functions.