Taxability of the donation received: It gives a detailed look of all the donations they took for the course of a year. It is very important that non-profit organizations keep a record of the donations they take in and from whom they accept. Although non-profits are exempt from paying income tax, except for a few rules for property income or capital gains.
Different donations received:
- Unrestricted commitment incomes: If the giver does not express the reason for commitment, then it will come under unhindered commitment incomes.
- Temporarily restricted net assets:
If the giver specifically states the use of the donation, it would go under temporarily restricted net assets. - Permanently restricted net assets:
These donations are such which the receiver can never use in perpetuity at any point of time.
Accounting for Expenses:
Expenses vs Expenditure done- Accounting of the expenses which are 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:
The spending from the whole collection of donations accounts for a specific reason.
Budgeting
- Approval of budgets by trustees- A budget is an estimation of revenue and expenses over a specified future period. It is then approved by the trustees of the non-profit organization after a timely review of financial reports and planning.
- Spending vs budgeting reports- The budget report is made by trustees and the annual spending report is compared, and then a balance is made of all the spending.
