In nonprofit accounting, the Statement of Activity (also known as the Income Statement or Statement of Revenues, Expenses, and Changes in Net Assets) serves a similar purpose as the for-profit Income Statement or Profit and Loss Statement, but with some key differences.
While a for-profit income statement typically reports on revenues and expenses over a specific period, the nonprofit Statement of Activity reports on revenues, expenses, and changes in net assets for a fiscal year. Additionally, the nonprofit statement breaks down revenue and expenses by functional category, such as program services, management and general, and fundraising, rather than by product or service line.
Another key difference is that nonprofits report their revenues and expenses on a gross basis rather than net. For example, if a nonprofit receives a grant for $100,000, the entire amount is recorded as revenue, even if a portion of it is restricted and must be used for a specific purpose. Similarly, if a nonprofit incurs $50,000 in expenses related to a specific program, the entire amount is recorded as program expense, even if a portion of it is reimbursed by a grant or donor.
Finally, the nonprofit Statement of Activity includes a section for changes in net assets, which reflects the increase or decrease in the nonprofit’s overall financial position over the fiscal year. This section includes items such as gains or losses on investments, unrealized gains or losses on property and equipment, and any other non-operating revenue or expense items.
In summary, while the nonprofit Statement of Activity and for-profit Income Statement share some similarities, the nonprofit statement is designed to report on revenue and expenses by functional category, gross basis, and changes in net assets over a fiscal year, providing a comprehensive picture of the nonprofit’s financial position.