What are the financial reporting requirements for non-profit accounting?

A non-profit organization issues a slightly different set of financial reports than reports generated by a for-profit entity. One of the reports is different from the reports of nonprofits. Although non-profit companies are not required by law to issue annual financial reports. Nevertheless, many non-profit managers are aware of the added value that annual reports can offer to government officials, donors and employees. The financial statements explain the organization’s achievements and effectiveness in managing its profits and liabilities. Some students need help with international financial assignments. These reports also give non-profit agencies the opportunity to adapt their ways of presenting their monetary transactions to those observed in the for-profit arena.

IRS Form 990

Form IRS 990. is the most important financial disclosure a non-profit organization submits, at least according to the national government. Nonprofits that receive tax-exempt status use Form 990 to report their operations, income, and expenditure to the Internal Revenue Service. Non-profit organizations, as exempt entities, do not have to collect taxes on income related to the fulfillment of their objectives. However, for other events, such as the sale of pastries, raking and other activities that are not specifically linked to the needs of the fundraiser, these organizations are responsible for “unrelated corporate income tax”.

Government reports

Although the national government decides whether or not a charity requires a tax exemption, its local authorities grant the entity non-profit status. States also require non-profit organizations to disclose their charitable contributions, grant income, and administrative expenses to the appropriate authority. These reports must adhere to standards developed by the American Institute of Certified Public Accountants (AICPA). These standards are also referred to as Commonly Accepted Accounting Principles. This translates financial data into a context known to financial experts.

Statement of functional costs

The statement of operating expenditure, as the name suggests, lists expenditure by purpose, such as program expenditure, operating expenditure and fundraising expenditure. This report also lists costs by form, such as wages and pensions, rent and electricity, etc., which goes one step further. The presentation is usually a matrix or table. The division informs readers of this financial report of the balance your non-profit organization has in supporting services and retaining its workforce, including auditors, board members, or potential grant providers. On the one hand, administrative expenditure should not be grossly disproportionate to the financing of the program.

On the other hand, organizational funding could not be reduced so low that you could not employ capable and qualified staff. Expenditure may be in operation in two or three classes at the same time. In this situation, it is necessary to evaluate the relative breakdown and appropriately assign costs in each category.

Statement of financial position

The report on the budget of the non-profit organization is close to the profit and loss statement of the for-profit company. The balance sheet shows its assets, liabilities and equity (Assets – Liabilities = Equity) in a for-profit company. The word “net assets” replaces “equity” for a non-profit organization, as the managers of a non-profit company do not have an ownership interest (Assets – Liabilities = Net assets) in their agency.

Declaration of activities

Instead of recording income statements for for-profit corporations, nonprofits use a statement of operations to illustrate the link between income and expenses. The mismatch between sales and expenses reflects a decrease in the organization’s net assets. Non-profit entities are entitled to have total revenues exceed their costs. Federal and state regulations mandate organizations to redirect these positive net asset improvements to their fundraising activities.

Cash flow statement

The cash flow statement shows revenues flowing in and out of a given time frame, whether it is a month, a quarter, a year or produced for a defined period on demand. Students also search the Internet for international financial issues. Based on the non-profit organization’s cash flows, the cash flow statement usually contains up to 3 parts. This indicates the total assets of most non-profit organizations from:

  • Operational activities: (such as unlimited funds obtained by fundraising operations or premium cash charges)
  • Investment activities (such as costs or profits related to the acquisition or sale of equipment or other fixed assets)
  • Financial activities (for example, gains on the issue or redemption of bonds)

Annual report

Non-profit organizations also provide important financial details that are not included in the basic financial reports. Join the annual report, which will serve to deepen the economic stability of the company. Materials related to the annual report may include:

  • Documents on participation in fundraising or community activities that recognize that significant participation could indicate potential economic development, especially if a new group of donors has been created.
  • Lists of finances and their rate of donation
  • Debate about the project or events of the past year, successes in advocacy, volunteer help, etc.


In this article, we have explained the basic requirements for financial reporting for nonprofit accounting. Following this article should help you better understand this concept.

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