Do you wonder if there’s any difference between non-profit accounting and for-profit bookkeeping? There are similarities, of course, but there is a distinct difference between these two forms. Read on to find out all about accounting for non-profit organizations.
Accounting for Non-Profit Organizations
A non-profit organization’s primary goal is not making profits. It does, however, need to generate enough income to allow it to operate and successfully manage its expenses. All the transactions go through careful tracking for different purposes, such as tax filing, cash flow management, third party auditing, and ensuring financial stability.
Accounting is a process that includes recording monetary and economic activities. It is a process that helps manage a company or entity’s records by interpreting, summarizing, and analyzing data. Accountants involved with non-profit organizations often use their skills for the benefit of many.
Non-profit organizations have a set of accounting rules that generally do not apply to other businesses. They, of course, answer to the government, but are also directly under the supervision of granting agencies, boards of directors, and other governing bodies. Other businesses usually do not operate this way.
Most non-profits get their funds from multiple sources, which include any of the following: investment income, fundraisers, multiple grants, memberships, and financial contributions. They also take in-kind contributions like hours of work or expertise. Keeping track of all these can be hard work, requiring large amounts of paperwork in addition to annual government reporting and basic accounting.
Do you wonder what method non-profit accounting agencies use to keep track of all those records? To accurately record corresponding grant periods, non-profit accountants use the accrual accounting method. This allows them to accrue expenses against each source of funds, pay them off the following month, and charge each expense in the month it occurred.
NFP Partners will improve your non-profit organization’s financial management experience. With our expertise and understanding of accounting, we will help you meet each challenge and increase your capacity to deliver valuable results. Call us today so we can help you.