Statement of Financial Position vs Statement of Activities

The Statement of Activities (SOA) is the correct nonprofit term for the report we may commonly have called the income statement, budget report, profit & loss, income and expense report, etc. The SOA report shows a nonprofit organization’s income, expenses, and net income for a Mental Health Billing specific period of time, all or part of a fiscal year. The report reflects the changes to an organization’s net assets resulting from financial activities that occurred during the fiscal year. A positive change indicates a surplus, meaning the organization brought in more resources than it spent during the period, thereby increasing its net assets.

Is the Statement of Activities required for nonprofits?

• Of course, not every nonprofit relies so heavily on donated goods or in-kind donations.
• Although it’s not the best information for internal decision-making, your client is still required to have a statement of activities prepared for many reasons.
• This category of net assets requires careful tracking and reporting to ensure compliance with donor intentions and to maintain trust and transparency.
• By contrast, for-profit organizations can often categorize expenses in broad buckets like Sales, General and Administrative (SG&A), and Cost of Goods Sold (COGS) across several product lines.
• In the SOA for the year ended June 30, 2022, the funds received via grants and net assets released from restrictions total $25,000.
• It demonstrates how resources are used to advance your mission while maintaining operational efficiency.

This classification ensures that the financial statements accurately reflect the donor’s intentions and the organization’s ability to use the funds. For instance, a grant designated for a specific program must be reported as temporarily restricted until the program’s objectives are met. This level of detail not only aids in internal financial management but also provides donors with confidence that their contributions are being used as intended. Nonprofit financial statements summarize the financial activities and health of nonprofit organizations over a particular period- usually a quarter or fiscal year. Various disclosures and reports are included in the statements that help stakeholders understand how the nonprofit manages its funds and resources to fulfill its mission.

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For example, if total revenues for the fiscal year are $2,200,000 and total expenses are $1,850,000, you subtract the expenses from the revenue to determine the net assets. Expenses are the costs incurred by a nonprofit in carrying out its activities, including program delivery, administrative operations, and fundraising efforts. If you haven’t seen one for your organization yet or want to try your hand at compiling one, use our contra asset account template to get started. For instance, if your nonprofit has $55,000 in expenses and $65,000 in total revenue, it would appear that your net assets are positive, at $10,000. However, if $15,000 of your revenue is restricted, you’re actually $5,000 in the red and should cut expenses to maintain a sustainable organization.

• Documents such as your nonprofit statement of financial position, statement of cash flows, chart of accounts, and statement of functional expenses are all equally important.
• Revenue includes cash inflow such as donations, grants, membership dues, and income from services or products offered by your nonprofit.
• This, along with your net assets and change in assets, should be included in and clearly identified in your report.
• If you are wondering how this fits into the grant writing process over all, check out my (free) masterclass on the 5 steps to win grants.
• The SOA report shows a nonprofit organization’s income, expenses, and net income for a specific period of time, all or part of a fiscal year.

Additional Resources & Next Steps

Tyler’s extensive background in accounting, tax, and financial consulting set the foundation for Velu’s outsourced accounting solutions for nonprofits what is a statement of activities and small businesses. As a fractional CFO, he goes beyond routine duties, guiding organizations with strategic insights for sound financial decisions. Velu’s services address the unique challenges faced by nonprofits and small businesses, fostering sustainable growth. Tyler places great emphasis on meticulous attention to detail in financial record-keeping, implementing efficient systems to ensure transparency and streamline operations.

Conversely, a negative change signifies a deficit, indicating that expenses exceeded revenues, leading to a decrease in net assets. This figure provides a clear summary of the organization’s financial performance and its ability to sustain operations and grow its mission over time. Revenues represent the total inflows of resources received by the non-profit organization from various sources.