Unlike for-profit businesses, not-for-profit or nonprofit organizations do not have owners. Nonprofits' primary mission is to fill a need in society rather than to earn profits for owners. As a result of this difference, nonprofits issue a statement of activities instead of an income statement.
Nonprofits issue a balance sheet, but it is usually referred to as the statement of financial position. The third section of this statement (which is the difference between the amount of assets and liabilities) has the heading of net assets instead of stockholders' equity or owner's equity.
Since donors may stipulate restrictions on their contributions, the financial statements issued by nonprofits must report separately the net assets without donor restrictions, and the net assets with donor restrictions.
Nonprofits are required to report their expenses by function. This means that expenses are presented according to the programs provided and by supporting services such as fundraising, and management and general.
As with for-profit businesses, the financial statements issued by nonprofits are to include a statement of cash flows as well as notes to the financial statements.
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For the past 52 years, Harold Averkamp (CPA, MBA) has
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