The bookkeeping for the non-profit sectors constitutes the principles and customary accounting tasks that all business employees apply to record, analyze, and track the financial transactions. And for this, some vital aspects of bookkeeping are required that may be affected by the non-profit organization.
The main allegiance of the non-profit organization is its board members and board. After determining the non-profit organization’s model of accounting and fiscal year, the tax-exempt status has some distinctive bookkeeping requirements.
The Non-profit Organisations
No doubt running a non-profit organization is good. However, in the exchange of tax-exempt, the internal revenue services also need to qualify by such organizations.
Here, the organizations need to agree on some of the non-profit board members voting and also need to agree on the financial transparency of the organization. However, the IRS code of tax within which these non-profit organizations have been exempted from the tax may be affected by the financial record keeping details.
For instance, these non-profits need to maintain the financial record as they are stated for the charitable purpose.
The General Accounting Principle for the Non-profits
The non-profit bookkeepers may need to have some accounting standards for the businesses set by the FASB (financial accounting standard board).
The group needs to publish some general accounting principles that are specially implemented for the no-profits. For instance, the FASB 116 considers the reporting contribution revenues and records maintenance, including pledges and donor contributions.
Besides that, the FASB 117 also says to the non-profit organizations to use financial position statements, cash flow statements, and activities that deliver the statement of the functional expenses of non-profit business organizations.
Expenses and Revenues
The non-profit business expenses and revenues are different from the profit business organizations. However, the non-profit organization’s sources of revenues include the program fees, donation, sales incomes, investment income, membership dues, and also proceed from the fundraising events. On the other side, non-profit organisations’ expenses include salaries, rent, financial services, travel expenses, and fundraising expenses.
For this, the FASB or bookkeeping requires that these organizations cover the expenses under the general program, management, and fundraising development. However, in some cases, the financial expenses record involves the organization’s ledger and some details of the charitable donation data.
The bookkeeping requires the non-profits to record the data as charitable contributions.
Similar to profit organizations, the non-profits also need to keep a record of the net assets. Their directors need to know about how much assets a non-profit has collected and how much revenues do exceed despite its expenses.
The bookkeeper calculates all the things to have a clear idea about the net asset. This may also be known as the profit assets for the non-profit business. This involves the calculation of all the assets minus the expenses.
The assets may include the value of non-profit organizations such as investment, property, cash flow, salaries, accounts, vehicle expenses, travel expenses, and others. Some liabilities also include such as loan payments.
Non-profit organizations also make tax payments. However, they are exempted from the taxes as per the IRS section 501. Still, they pay some excise duty tax, and that too calculated by the bookkeeper while doing the bookkeeping.
The non-profit organizations qualify under the same accounting principles as profit organizations. And by streamlining all the financial records, the non-profit organizations can account for the bookkeeping.
By following these accounting traits and principles, the bookkeeping will be easy. Make sure to fill in the correct accounting details in the form of the federal government to consider yourself as a non-profit organization.