Nonprofits typically create three primary financial statements:
- Statement of Financial Position: This statement, also known as a balance sheet in for-profit accounting, provides a snapshot of the organization’s financial position at a specific point in time. It shows the organization’s assets, liabilities, and net assets (or equity).
- Statement of Activity: This statement, also known as an income statement or statement of operations in for-profit accounting, shows the organization’s revenues, expenses, gains, and losses for a specific period of time. It is used to determine the organization’s net income or loss.
- Statement of Cash Flows: This statement shows the sources and uses of cash for a specific period of time. It is used to analyze the organization’s liquidity and cash flow position.
In addition to these primary financial statements, nonprofits may also create supplementary schedules and notes to provide more detailed information about their financial activities and performance. They may also be required to file additional reports with regulatory agencies, such as the IRS or state attorney general’s office.