An organization’s operating expenses comprise labor, services, or things you buy or spend resources on to accomplish mission activities and to manage the organization. For small and midsize nonprofits without overly complex systems, 4-digit account numbers are usually adequate. Longer numbers can certainly be used, but that requires more keystrokes and may be harder to remember.
Operating revenue may derive from two broad categories: 1) earned (or exchange transactions), usually from program activities or contracted services or from investments, and 2) contributions, usually in the form of gifts, grants, or in-kind goods or services from institutions, agencies, or individuals. Contributions may also come with donor restrictions that are either temporary (time or purpose) or permanent (endowment).
Net assets accounts reflect what is left over from assets after you subtract liabilities. “Net assets” is the nonprofit term or equivalent to for-profit equity or retained earnings. For small and midsize nonprofits without overly complex systems, 4-digit account numbers are usually adequate. Longer numbers can certainly be used, but that requires more keystrokes and may be harder to remember. Net assets account numbering usually begins with 3.
There is a set of reports required by GAAP (generally accepted accounting principles) that are standard components of an audit. These are the Statement of Financial Position, the Statement of Activities, the Statement of Functional Expenses, and the Statement of Cash Flows. (See links below.) Between audits, an organization produces interim reports internally, which can be formatted a little differently while still tracking data that will comply with GAAP requirements. These reports serve various management purposes.
According to much research, about 65% of the general population are visual learners, and providing visuals along with data improves both comprehension and retention. So, adding a dashboard or snapshot summary as the cover page for the more detailed financial report packet, featuring charts and graphs showing trends and comparatives, is likely to enhance understanding among your board members and other key stakeholders of your organization’s financial data.
Liability accounts reflect what you owe to others and what you hold on others’ behalf. For small and midsize nonprofits without overly complex systems, 4-digit account numbers are usually adequate. Longer numbers can certainly be used, but that requires more keystrokes and may be harder to remember. Liability account numbering usually begins with 2.
Assets accounts reflect what you have (cash, investments, fixed assets), what others might owe to you (receivables, deposits), or what you might have invested for the future (prepaids, inventories). For small and midsize nonprofits without overly complex systems, 4-digit account numbers are usually adequate. Longer numbers can certainly be used, but that requires more keystrokes and may be harder to remember. Assets account numbering usually begins with 1.
