Nonprofit Accounting Basics

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Founder's Role

Every founder needs to determine his or her role within the organization. Probably the most difficult thing to realize is that you will not be the owner of the organization.

Define Purpose and Mission

Every organization has a mission. For for-profits, it is to create profit for the owners or shareholders. In the nonprofit sector there are just about as many missions as there are organizations.

Inventory

Inventory represents the value of assets held by an organization for resale.

Accounts Payable

Accounts Payable is a liability account found on the Balance Sheet or Statement of Financial Position that represents money owed to another party.

Security Act 2.0: What you need to know

On December 29, 2022, President Biden signed the Consolidated Appropriations Act, 2023, which includes the provisions of the Securing a Strong Retirement Act, commonly called SECURE 2.0.

Sending Invoices

Invoices may need to be prepared for a number of reasons. Some organizations sell books or newsletters for a fee. Others require registration for meetings or bill for dues.

Internal Controls

What are internal controls?

Internal controls are the financial processes and procedures that enable the organization to safeguard its assets.

General Ledger

The general ledger documents all of the organization’s transactions over the course of a year for all accounts.

Recording Other Transactions

The general ledger is the journal where all transactions are posted throughout the year and balances are maintained.

Sample Journal Entries for Government Grants

The following are the entries necessary for cost-reimbursable government grant (assuming the grant is determined to be an exchange transaction):