How to Do Non Profit Accounting
Nonprofit accounting is similar to for-profit accounting. A nonprofit company's main objective is not to turn a profit but still generate enough income to operate and manage expenses. The transactions must be tracked for tax purposes to ensure financial stability. This article will instruct you on how to do nonprofit accounting.
How To Do Non Profit Accounting
Create a chart of accounting starting with your bank and credit card accounts. Use the opening balances on your accounts but use the date of your accounting year as the date on your chart of accounting.
Create a chart of your liability accounts. Liabilities should include anything that is owed or will be owed in the future such as payroll taxes.
Set up any fixed assets, which are things owned but will not be used up within one year. Fixed assets depreciate each year based on the schedule of depreciation by the IRS.
Create expense accounts related to your industry. Try to separate operating expenses from fundraising expenses.
Set up your customers or donors to track donations during the year.
Set up your vendors so you will know how much you have paid to each vendor during the year.
Make sure your nonprofit organization is ready for an audit especially if your organization receives any government grants or plans to apply for them in the future. Auditors look at the accounting process closely.
Keep copies of all of your documents including written checks and deposits.
Get approval for all expenses and make sure they are in writing.