Nonprofit Organization Accounting From houses of worship to youth organisations to neighbourhood business meetings, non-profit organisations make our communities more bearable. Because not-for-profit organisations do not have business owners, they rely on reserves from commitments, participation contributions, programme earnings, fund-raising events, open and private awards, and venture salaries. We intend to introduce some fundamental concepts unique to non-profit accounting. Significant aspects of non-profit accounting include: Taxability of the received donation: It provides a detailed breakdown of all the donations they received over the course of a year. It is critical that non-profit organisations keep track of the donations they receive and from whom they accept them. Except for a few exceptions for property income or capital gains, non-profits are exempt from paying income tax. Various donations were received: Unrestricted commitment income: If the giver does not express the reason for the commitment, it is classified as unrestricted commitment income. Temporarily restricted net assets: If the donor specifies the use of the donation, it will be classified as temporarily restricted net assets. Net assets that are permanently restricted: These are donations that the recipient can never use in perpetuity at any point in time. Accounting for Expenses: Expenses vs Expenditure done- Accounting of the expenses done for the long run that can be en-cashed, and the cost incurred to meet every day and current financial needs of the business, generally for a short term is dealt with. Spending from Corpus: Spending from the total collection of donations for a specific purpose. Budgeting Budget approval by trustees- A budget is an estimate of revenue and expenses for a given future period. It is then approved by the non-profit organization's trustees following a timely review of financial reports and planning. Spending vs. budgeting reports- Trustees create the budget report, which is compared to the annual spending report, and then a balance of all spending is created. Here are some pointers to help non-profits with their bookkeeping! IRS acceptance If the IRS approves it, the income of a non-profit entity is exempt from federal income tax. Donation Recipients' Taxability Nonprofits are exempt from paying taxes on donations received. State-level taxes and sales tax Non-profits are also required to pay sales tax and other taxes based on state requirements. The Employment Tax Even if they are exempt from federal income tax, non-profits must pay employment tax.

1. Meru Accounting
Notes on Taxation for Non Profits in
United States
Significant aspects of taxation for Non profits :
Approval of IRS: The income of Non profit entity is exempt from Federal Income tax if it is
approved by IRS.
Taxability of Donation received: Donation received by Non Profit is exempt and no tax is
payable on same.
Employment Tax: Non Profits are required to pay employment tax even when they are exempt
under federal income tax.
Sales tax and State level taxes: Non Profits are required to pay sales tax and other taxes based
on state level requirements.
Accounting for donations received:
Unrestricted contribution revenues: If the purpose of contribution received is not stated by
donor, it would go to unrestricted contribution revenues.
Temporarily restricted net assets: If the use of the donation is specifically stated it would go
under temporarily restricted net assets

2. Permanently restricted net assets: These donations are such which can never be used in
perpuity at any point of time.
Accounting for Expenses:
Program Expenses : Expenses incurred for specific its programs are classified as Program
Expenses.
Support Expenses : Expenses incurred for supporting of program are classified as support
expenses. They can be related to fundraising activities or general expenses.
Chart of accounts needs to be prepared in line with the reporting requirements of the statue and the
management reporting required by trustees.
Budgets for Non Profits:
Budgeting for non profits is divided into many aspects like Grants, budgeting for program expenses,
expenses by functions etc.