A non-profit organization is primarily set-up for a variety of humanitarian, environment, or social purposes and services and is not intended to make a profit for the organization or its members. However, in order to ensure its existence and financial stability, the organization still needs to generate income – from grants, donations and fundraising campaigns – and to manage where these funds go as well as their operational expenses. The method of accounting used for non-profit services is basically the same to that of any other business or profit-oriented establishments particularly in the areas related to bookkeeping, cash-flow management, filing of taxes, and financial audits from third-party sources.
The Non-Profit Accounting Structure
The following describes the accounting structure that every non-profit organization should have and maintain. This includes:
• Chart of Accounts — this is important to manage balances for the organization’s bank accounts. If the organization maintains credit cards, it should also be included in these charts
• Chart of Liability Accounts — everything that the non-profit organization owes is considered liability and should be tracked and managed like payroll taxes. Planned future loans and other foreseen liabilities should be anticipated and included
• Customer Charts — in the accounting for non profit organization point of view, donors and other fund providers are considered customers. All donations should be tracked each year and these are reflected on the organization’s tax return. If the organization is classified as 501(c)(3) by the IRS, receipts should be given to customers as their donations are considered tax-deductible based on the Internal Revenue Code.
• Chart for Vendors — all cash flow on expenses and payments paid to suppliers and vendors should be properly tracked and reported as part of accounting for non profit organization, particularly if the organization received federal stimulus funding
Other things to consider include maintaining duplicate and accurate copies of all documents and records in preparation for future audits. All expenses should have the proper approval sign loop and all checks issued and received should be properly documented and duplicated. Lastly, reports should be maintained on a monthly basis for a stress-free nonprofit fund accounting.
Source by Tom Hope