Not-For-Profit Accounting

Unlike traditional businesses, not-for-profit organisations are not built around profit generation. Instead, they address social concerns in various sectors of our communities.

These concerns might be educational issues, religious functions, social wellness, the arts, or health care issues. One difference between not-for-profit organisations and for-profits is revenue source. Most non-profits are funded through donations, grants, membership payments and other non-traditional income sources. There are special rules that non-profit accountants adhere to when managing financial documents. E.g. accountants must record all donated materials and services. In some cases, donors require that funds be used for a specific purpose and this must be carefully documented. Small to mid-sized not-for-profit organisations might follow cash-based accounting standards, rather than accrual-based ones. This means that revenue is recorded only when cash is received and expenses paid in full. Also, not-for-profits do not have owners and are tax-exempt. Governments grant this tax-exemption status so they can continue to benefit society. Most of these organisations do not use a traditional balance sheet, instead opting for a “statement of financial position.” This statement accounts for assets and liabilities, but does not need to account for owner’s equity. Rather than using an income statement (P&L), most not-for-profits simply compile a statement of activity for each quarter, which lists revenues plus net assets, minus expenses. Colour Accounting is our financial literacy course. It will help anyone learn the core principles of accounting and apply them in a real world environment.  Click here to secure your place. [traininglist slug=”colour-accounting-normal”]  ]]>