How To Read A Nonprofit Income Statement

The nonprofit reports income and expenses on the statement of activities.

How to read a nonprofit income statement. The income statement also called a profit and loss statement is one of the major financial statements issued by businesses along with the balance sheet and cash flow statement. It outlines how much money is available in bank accounts and other investments. Each step down the ladder in an income statement involves the deduction of an expense. The next financial statement that you will see presented after the statement of financial position is the statement of activities.

In a for profit this is referred to as earnings. This example financial report is designed for you to read from the top line sales revenue and proceed down to the bottom line net income. The income statement also known as the profit and loss p l statement is the financial statement that depicts the revenues expenses and net income generated by an organization over a specific. The basic suite of financial statements a company produces at least annually consists of the statement of cash flows the balance sheet or statement of financial position and the income statement.

Income statements show how much profit a business generated during a specific reporting period and the amount of expenses incurred while earning revenue. Often referred to as the income statement since the term is more commonly associated with for profit companies and earnings the nonprofit statement of activities follows the basic formula. And other debts and liabilities. Income statement or statement of activities with budget comparison.

This statement is in lieu of the income statement that is used by for profit companies and it reports the change in permanently restricted temporarily restricted and unrestricted net assets. Revenues less expenses equals the change in net assets. The value of property furniture and equipment. The statement of activities lists the revenues first and calculates a total.

The statement of activities communicates all of the revenue earned by the nonprofit and all of the expenses incurred during the period. Group 1 review income statement group 2 review budgeted income statement group 3 review audited statements of activities and functional expenses and compare to cash basis income statement group 4 review statement of financial position and compare to cash basis balance sheet. The second is that an income statement is based on a few very simple concepts which you already understand. Nonprofit financial statements include two important substatements.

Identifies the business the financial statement title and the time period summarized by the statement. The statement of financial position also called a balance sheet provides an overview of what an organization is worth.