Accounting Term: What Is a Statement of Activities?

statement of financial activities

You can use unrestricted funds for any mission-oriented purpose, including paying general operating expenses and salaries. Simply, it reports your organization’s revenue and expenses during a specific period and the difference between them. The Statement of Activities is the Income Statement of a nonprofit organization.

statement of financial activities

Code for Science & Society depicts their financial expenses on this page of their report rather concisely and transparently. Online websites like Charity Navigator and GuideStar also use these reports to rate your organization. Investing revenue is the amount of interest you can make from investments. Investing expenses are the purchases of long-term investments and any payments on long-term investments like buildings, land, equipment, etc. For example, some investors might want stock repurchases, while others might prefer to see that money invested in long-term assets. A company’s debt level might be fine for one investor, while another might have concerns about the level of debt for the company.

Are income statements and Statements of Activities the same?

Sales, cost of goods sold (COGS), gross profit, and operating expenses are all inputs for the income statement. So is operating income, which you generate from day-to-day business activities. Non-operating income is inconsistent and unpredictable, so you can’t rely on it to produce annual profits. Your business must produce a majority of statement of financial activities its net income from operating income activities because operating income is sustainable. Nonprofits must file financial statements with the IRS to follow compliance laws, which is not the only reason they should include these activities. The statement of functional expenses gives donors more details on how the organization spends funds.

  • If you’re starting a new nonprofit, a statement of activities is one of the 4 financial reports you must file.
  • As a fractional CFO, he goes beyond routine duties, guiding organizations with strategic insights for sound financial decisions.
  • This report also shares how things can be improved by increasing revenue and decreasing costs.
  • And be the trusted financial partner you can turn to for answers to your questions and expert financial advice.
  • As with for-profit businesses, non-profit organizations must also account for and detail all their enterprise’s financial components, inflows, outflows, and operations.

Even when analyzing audited financial statements, there is a level of trust that users must place in the validity of the report and the figures being shown. When analyzing financial statements, it’s important to compare multiple periods to determine any trends and compare the company’s results to its peers in the same industry. The goal of a statement of activities is to determine whether an organization can fund its activities and if not, to pinpoint where changes can be made to increase revenue or decrease costs. The process of creating a statement of activities is not difficult and should not take long to complete.

Questions To Ask Yourself – Statement of Activities

Expenses, representing the cost of goods sold and operating expenses, are the costs your nonprofit incurs during its business operations, including program delivery and fundraising activities. A Statement of Activities includes revenue and expenses during a nonprofit’s reporting period (a fiscal or calendar year) and gives an overview of the changes to an organization’s net assets during that time. Financial statements let stakeholders—such as shareholders, creditors, and regulators—understand a company’s overall financial performance and health.

By understanding the various sources of revenue and expenses, you can target potential donors and make more informed decisions about how to allocate resources. A nonprofit financial statement summarizes a nonprofit organization’s financial activities and health over a specific period, typically a fiscal year or quarter. It includes various reports and disclosures that help stakeholders understand how the organization manages its resources and funds to fulfill its mission. Financial statements are the ticket to the external evaluation of a company’s financial performance. The balance sheet reports a company’s financial health through its liquidity and solvency, while the income statement reports its profitability.

Nonprofit Statement of Activities: Any Questions?

If you’re ready to seek funding for your business, lenders look at your financial statements as they determine your eligibility for a business loan. Public companies are also required to publish their financial statements in an annual report. The two reports serve a similar purpose but are tailored to the specific financial structures and goals of their respective organizations. A statement of activities and an income statement are essentially the same, with the main difference being the terminology used for different types of organizations. An income statement is more commonly used by for-profit companies, while a statement of activities is more popular among nonprofits. Unlike the balance sheet, the income statement covers a range of time, which is a year for annual financial statements and a quarter for quarterly financial statements.

statement of financial activities

Foundations require nonprofits to provide financial statements when they apply for grants. Major donors also may want to see financial statements before giving a significant gift. When a nonprofit shares more about its financial health, foundations and sponsors see that the nonprofit is financially viable and feel safer giving. As described previously, obtaining, maintaining, and retaining a nonprofit’s 501(c)(3) status requires compliance, including in bookkeeping and financial statements. Failing to properly collect, prepare, and submit accurate, honest, and complete nonprofit financial statements can lead to issues, including losing the tax-exempt status. An often less utilized financial statement, the statement of comprehensive income summarizes standard net income while also incorporating changes in other comprehensive income (OCI).

Statement Of Activities vs Income Statement

This information ties back to a balance sheet for the same period; the ending balance on the change of equity statement equals the total equity reported on the balance sheet. The statement of activities can also help you assess your organization’s ability to service debt. By understanding where your money is coming from and going, you can make informed decisions about future expenditures.

statement of financial activities

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