For the most part, non-profit bookkeeping is very much the same as traditional for-profit bookkeeping. There are a couple of things of fundamental differences that separate the two. These differences include tracking donations, reporting, non-restrictive, and restrictive funds.
Tracking donations is one of the biggest differences. It may sound like a very simple thing to do, however, at the end of the year, all of the donors expect their end-of-the-year tax statements to be absolutely perfect. The date, the donor, the amount, and the purpose of the funds are extremely important details to have down to the t.
Reporting is another thing that separates for-profit from non-profit bookkeeping. For a non-profit to keep its non-profit status with the IRS, accuracy, and paperwork is key.
Keeping restrictive and non-restrictive funds separated is the largest difference. Before we dive into ‘how to keep them separated, we first must understand exactly what they are and what they are not. Non-restrictive funds are the easiest of the two. These funds can be thought of as general funds. Funds that are given without a stated purpose. These funds could be used for administrative purposes, to pay the light bill, or for any other use that the board sees fit.
On the other side of that, would be restrictive funds. These funds have been given for an assigned job. For instance, Bob Smith passed away. His family asked that he in lieu of flowers, money be donated to the building fund for the Humane Society in Bob’s hometown. Once funds are donated, they are obligated to be used for the building fund only. These funds become restricted.
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