If you run a nonprofit organization, your accounting responsibilities differ from those of for-profit businesses. This is because non-profit organizations handle tax payments, financial statements, and record keeping differently than other businesses.
A nonprofit organization operates to fulfill a charitable, educational, religious, or scientific purpose, rather than to earn money. Although nonprofits do need revenue to operate, earning profits is not their primary function.
Similar to for-profit businesses, nonprofit bookkeeping relies on choosing an accounting method to record incoming and outgoing money. Whether you’re thinking about starting a nonprofit or already have, understanding the unique aspects of accounting for nonprofit organizations is essential. Here are some things to take into consideration:
• Cash-basis or accrual accounting: You must record all incoming revenue and outgoing payments with an organized accounting system. You can choose a cash-basis or an accrual accounting system for nonprofit organization.
• Tax exemption: Being exempt from federal income taxes does not necessarily exempt you from filing an annual small business tax return. You are still required to report revenue and expenses to the IRS. Keep accurate records of and report your activities and finances for the year.
• Financial statements: In nonprofit accounting, you should create financial statements to report your business’s finances. Nonprofit accounting relies on using the statement of financial position (balance sheet), statement of activities (income statement), and cash flow statement.
Nonprofit Accounting Can Get Tricky
Did you know that Goldin Group CPAS are the exclusive financial service providers to the two preeminent and biggest trade associations of Nonprofits in the DC metro area: The Center for Nonprofit Advancement and Maryland Nonprofits, each with 1,300 members? Goldin Group acts in the role of CFO for Maryland Nonprofitsand partners with the Center for Nonprofit Advancementto provide members access to high-quality financial management and accounting at a reasonable cost.
Customized to nonprofits, we assume accounting functions for non-profits and our financial management service helps association members maximize the effectiveness and efficiency of their organizations. Can we help your non-profit and its members in similar ways? If you are a non-profit or a small business that is looking to outsource your accounting or if you need help managing any aspect of your business’s or nonprofit’s finances, we want to hear from you. Call us at (301) 913-0008 or email email@example.com to make an appointment.