Accounting for Non Profit Organization

From houses of worship to youth associations to the neighborhood assemblies of business, not-for-profit associations make our group’s more bearable spots.

Not for profit organizations don’t have business proprietors and must depend on reserves from commitments, participation contribution, program incomes, raising money occasions, open and private awards, and venture salary.
We intend to merely introduce some of the basic concepts that are unique to nonprofit accounting.

Significant aspects of accounting for nonprofit organizations:

Taxability of Donation received It is a detailed look at all the donations that they took in for the year. It is very important that nonprofits keep a record of the donations that they take in and from whom. Non-Profits are exempt from paying income tax, except for a few rules around property income or capital gains.

Different types of donations received:

  • Unrestricted commitment incomes: If the reason for commitment got isn’t expressed by the giver, it will go to unhindered commitment incomes.
  • Temporarily restricted net assets:
    If the use of the donation is specifically stated it would go under temporarily restricted net assets.
  • Permanently restricted net assets:
    These donations are such which can never be used in perpetuity at any point in time.

Accounting for Expenses:
Expenses vs Expenditure done- Accounting of those expenses which are done for the long run that can be en-cashed, and the money incurred to meet out the daily and current financial needs of business, generally for short term is dealt with.

Spending from Corpus:
The spending from the whole collection of donations is accounted for the specific reason.


  1. Approval of budgets by Trustee- A budget is an estimation of revenue and expenses over a specified future period which is approved by the Trustee’s of the nonprofit organization after timely review of financial reports and planning.
  2. Spending vs budgeting reports- The budget report made by the Trustees and the annual spending report is compared, and a balance sheet is made of all the spending.

Here are some tips for Nonprofits to keep their Bookkeeping perfect!

  • Approval of IRS
    The income of Non-profit entity is exempt from Federal Income tax if it is approved by IRS.
  • Taxability of Donation received
    Donation received by Non Profit is exempt and no tax is payable on the same.
  • Sales tax and State level taxes
    Non Profits are required to pay sales tax and other taxes based on state-level requirements.
  • Employment Tax
    Non Profits are required to pay employment tax even when they are exempt under the federal income tax.

Balance Sheet

The balance sheet is a financial statement that summarizes all the assets, liabilities and capital of a particular company at a specific period of time. It shows all the amount that the company invested in a certain project, the amount of money it owns and it owes. It is prepared by all the profitable and non-profitable organizations.
The organizations prepare its balance sheet so that they can know the financial position of their organization. It is prepared by taking assets and liabilities and also fund based items.

Meru Accounting is a well-known accounting firm. It specializes in maintaining accounts for Non-profit organizations, to know more about our pricing and services contact us today!