United Charitable is a Virginia-based nonprofit organization that offers a charitable vehicle, the Donor Advised Fund, for more efficient charitable giving and record management. Through United Charitable’s Fiscally Sponsored Programs, social entrepreneurs, or Program Managers, receive continual oversight and support relating to the administration of charitable projects, including accounting tasks.
The process for financial reporting is quite different between a nonprofit and for-profit. Both entities must track their transactions, produce timely financial statements, and maintain documentation that supports their financial reports. However, the financial statements of each reflect their differing goals.
For-profit companies use a balance sheet listing the equity that shareholders or owners have based on the liabilities, assets, and profits of the business. Since nonprofits do not have owners, they do not have a traditional balance sheet as part of their financial statements. Rather, they create a statement of financial position (SOP). An SOP still looks at prior earnings, assets, and liabilities for the organization, but it shows the organization’s net assets, the result of subtracting the liabilities from the assets. These net assets are either unrestricted, permanently restricted, or temporarily restricted, and they represent the organization’s net worth.
When it comes to reporting revenues and expenses, for-profit and nonprofit organizations also differ. While a for-profit company produces an income statement listing gains, revenues, expenses, and losses, a nonprofit organization prepares a statement of activities. This statement denotes changes to the organization’s net assets for the current fiscal year.
