Asset & Cash Management

From Guidelines & Principles
Jump to: navigation, search

Net Assets

The net assets section of a nonprofit's statement of financial position reports totals for each of the following classifications:

  • Unrestricted net assets
  • Temporarily restricted net assets
  • Permanently restricted net assets

Unrestricted Net Assets

If a donor does not specify a restriction on his or her contribution, the amount received by the nonprofit is recorded as an asset and as unrestricted contribution revenues. Unrestricted contribution revenues (reported on the statement of activities) also cause the amount of unrestricted net assets to increase.[1]

Temporarily Restricted Net Assets

If a nonprofit receives a contribution that has a donor-imposed restriction (other than to be held in perpetuity), the amount is usually recorded as an asset and as temporarily restricted contribution revenues. Temporarily restricted contribution revenues (reported on the statement of activities) also cause the amount of temporarily restricted net assets to increase.[2]

Permanently Restricted Net Assets

If a donor stipulates that her contribution must be held by the nonprofit in perpetuity (forever, not be used up), the amount is recorded as an asset and as permanently restricted contribution revenues. Permanently restricted contribution revenues (reported on the statement of activities) also cause the amount of permanently restricted net assets to increase. [3]

Net Assets Diagram

Credit Balance Unrestricted Undesignated
  • Surplus (Deficit)

Board Designated

  • For Project
  • For Cash Reserve
  • For Acquisition
  • For Quasi-Endowment

Property & Equipment

  • Fixed Assets Net of Long-Term Debt
Temporarily Restricted Purpose Restriction
  • For Project
  • For Function
  • For Capital Purchases

Time Restriction

  • For Future Fiscal Year (imposed by donor)
Permanently Restricted Purpose Restriction
  • Endowment (imposed by donor)

Cash Management & Cash Flow

SEE ALSO: Statement of Cash Flows

Cash is ready money in the bank or in the business. It is not inventory, it is not accounts receivable (what you are owed), and it is not property. These can potentially be converted to cash, but can't be used to pay suppliers, rent, or employees.

Cash flow refers to the movement of cash into and out of a business. Watching the cash inflows and outflows is one of the most pressing management tasks for any business. The outflow of cash includes those checks you write each month to pay salaries, suppliers, and creditors. The inflow includes the cash you receive from customers, lenders, and investors.[4]

Resources & Sample Documents

Financial Management General

National Council of Nonprofits: Financial Management Resources

National Endowment for the Arts: Financial Management Guide Cash Management Basics

University of Kansas: Handling Accounting Guide to Basic Bookkeeping for Nonprofit Organizations

Financial Policies

Montana Nonprofit Association: Organizational Development Resource Library - Sample Financial Management Policies

CompassPoint: Nonprofit Fiscal Policies & Procedures: A Template and Guide

Blue Avocado: Accounting Procedures Manual Template

Nonprofit Accounting Basics: Financial Policy Guidelines

Jackson Nonprofit Network: Sample Credit Card Policy

Small Business Chron: Credit Card Policy for 501c3 Organizations

Financial Statements

SEE ALSO: Main Financial Statements Required by US GAAP Financial Statements for Nonprofits

BoardSource: Sample Nonprofit Financial Statements with Explanations Financial Statement for Nonprofit Organizations


Virginia Society of CPAs (VSCPA): VSCPA Nonprofit Resource Guides - Budgeting: A Guide for Small Nonprofit Organizations

BlueAvocado: Nonprofit Budgets Have to Balance: FALSE!

Accounts Receivable

Nonprofit Accounting Basics: Accounts Receivable

Financial Assessment How to Assess Nonprofit Financial Performance

Nonprofit Finance Fund: Top Indicators of Nonprofit Financial Health

Small Business Chron: How to Evaluate the Financial Statements of Nonprofit Organizations

Bank Reconciliation

AccountingCoach: Introduction to Bank Reconciliation

AccountingCoach: Sample Bank Reconciliation

BlackBaud: Nonprofit Bank Reconciliation Guide

Nonprofit Accounting Basics: Bank Reconciliations

Audit, Review, Compilation

White House Office of Management and Budget (OMB): OMB Circular A-133 Compliance Supplement 2016

National Council of Nonprofits:Audit Guide for Charitable Nonprofits

IRS: Charity and Nonprofit Audits

Keating et al. (2003):The Single Audit Act: How Compliant Are Nonprofit Organizations?