Nonprofit Bookkeeping & Accounting For Dummies, 2nd Edition

Chapter 3

Introducing Financial Statements

IN THIS CHAPTER

Reviewing nonprofit financial statements

Identifying external and internal users

Viewing a snapshot of nonprofit statements

If you’ve ever made a major purchase or tried to secure a large sum of money to purchase a home, the lending institution, mortgage company, or bank probably asked for personal financial information about what you earn (your income), what you own (your assets), and what you owe (your liabilities). This is because the lender wants to know if you have the ability to timely make the loan payments on the debt. Although this example is on a personal level, for-profit businesses, and nonprofit organizations need to provide similar information via financial statements.

Financial statements describe and summarize operating activities, obligations, and economic resources for a given period. This can be monthly, quarterly, or yearly. A wide assortment of individuals and entities evaluate these statements to get a clear picture of your nonprofit’s true financial position. Donors, investors, creditors, and even some governmental agencies evaluate these reports when they’re deciding whether to donate or lend money ...