Majority of the people are aware of the role played by the financial statements depicting details of a profit making company or organization. Very few people know about non profit financial statements and what information they contain. However, it is not very difficult to understand such reports.
Government as well as non profit organizations take money from us to channelize it in a proper way for a common cause. As these organizations, do not indulge in profit making activities, they are known as non profit organizations. Financial statements prepared to maintain an account of the non profit making activities are referred to as non profit financial statements.
Activities performed by Non Profit Organizations and their Activity Report:
The government or non profit making bodies manage public money by a method called Fund Accounting. In fund accounting, similar financial data are compiled together and an account of the money used for the common cause is maintained. It can be said, that the non profit organizations fit in somewhere between the government and the private sector. The non profit financial statements reflect all the transactions, which take place. It ascertains, how much money is left behind and the amount that can be used.
The non profit making bodies do not have a CAFR(Consolidated annual financial report) prepared. Instead, the details of their financial activities are enlisted in Report of Consolidated Financial Statements. The main aim of the non profit organization is similar to that of the government- to maintain less difference between yearly expenses and annual profits.
Non profit financial statements consists of the following:
- Balance sheet
- Statement of cash flow
- Business financial statement
- Income statement
Non profit financial statements are prepared by making use of FASB or Financial Accounting Standards Board, standards set by GAAP or General Accepted Auditing Principles and Accrual Basis Accounting.
Keeping a Vigil on Non Profit Organizational Activities may be Cumbersome:
Unlike other financial reports, where maintaining paper works is easy and simple, maintaining paper works of non profit organizations may be a bit complex. What the other financial statements indicate is, whether the money has been utilized as per norms, how much money has been used and if the correct amount has been made available to the shareholders. But keeping track of the money handled by the non profit organization, may be cumbersome, as they regularly apply for grants and aid. Moreover, grants are applied for a specific cause and this requires the non profit financial statements to be prepared with utmost accuracy. The activities of the non profit making bodies are watched by the government.
Last Updated on : 26th June 2013