When setting up the books for your nonprofit (specifically the chart of accounts), one of the best things you can do is check out Form 990 first, so your reports will easily fit into this format when you prepare this form to maintain your tax-exempt status. However, if you are working on your Form 990-EZ now and need some help categorizing, try this 990 EZ expense worksheet to categorize your income and expense for Form 990-EZ.
Setting up your nonprofit fund accounts
Nonprofits track their finances with a method called “fund accounting.” Fund accounting is a way to track your nonprofit’s resources. This method of accounting can also demonstrate whether your nonprofit if being a good steward of it’s resources.
There are three main categories of expenses to track as a nonprofit on the Form 990 (many more expense accounts and funds):
- Program Services
- Management, General and Administrative
Let’s take a look at them one by one.
Program Services - This is where you track the expenses that directly support your mission (some costs may be allocated over two or more categories). If for example, your nonprofit is an animal shelter, the types of expenses that would be here are the cost of the veterinary services provided, direct housing of the animals, payments to subcontractors such a veterinarians, etc.
General and Administrative – This may include the management and personnel salaries, conference and meetings, insurance, etc.
Fundraising – These expenses will include the cost of the fundraiser (dinner, set up fees, hall rental) and the cost of advertising the event. *Even though both of these expenses are for fundraising, they are on two different spots of Form 990.
Which brings us back full circle. Look over that Form 990 first and life will be much easier next May 15th! If you are ready to file Form 990-EZ, try Aplos e-File for nonprofit tax prep software.
Our nonprofit accounting software blog discusses accounting, tax, and specific Aplos functionality issues. Scroll the categories and click the topics that you are interested in.
This blog is informative and not meant as tax advice.