Understanding nonprofit finances can feel overwhelming, especially for new treasurers navigating tax filings, budgets and compliance. This glossary simplifies key nonprofit financial terms in an organized and easy-to-find way, to help you confidently manage your organization’s accounting.
0-9
- 501(c)(3)
- A section of the U.S. Internal Revenue Code that grants tax-exempt status to nonprofit organizations that operate for charitable, religious, educational, scientific, or literary purposes. Donations to 501(c)(3) organizations are typically tax-deductible.
- 990-EZ
- A shorter version of IRS Form 990, used by tax-exempt organizations with gross receipts under $200,000 and total assets under $500,000.
- 990-N
- Also known as the “e-Postcard,” this is a simplified IRS tax return for small tax-exempt organizations with annual gross receipts of $50,000 or less.
- 990-PF
- The IRS tax return form filed by private foundations, including details about grants, investments, and financial activities.
A
- Accrual Accounting
- A financial accounting method that records revenues and expenses when they occur, not when cash is exchanged.
- Administrative Expenses
- Costs related to management, finance, and general operations. This can include the cost of supplies, printing, and licenses.
- Annual Report
- A publication that summarizes the non-profit’s financial performance, achievements, and activities.
- Articles of Incorporation
- A legal document filed with the state to officially create a nonprofit or corporation, outlining the organization’s purpose and structure.
- Assets
- Items of value owned by the organization.
- Audit
- A review of financial records and practices to ensure accuracy and compliance. Audits are generally performed by individuals outside of the organization for transparency and accountability.
B
- Balance Sheet
- A financial statement that provides a snapshot of an organization’s assets, liabilities, and net assets (equity) at a specific point in time.
- Bank Register
- A record where deposits, withdrawals, and transfers are logged, and the bank balance is tracked.
- Bank Statement
- A document from the bank that lists the starting and ending balances, as well as deposits and withdrawals for a specific period, usually a month.
- Board of Directors
- A group of individuals who govern and oversee a nonprofit organization. They are responsible for the organization’s mission, strategy, and goals.
- Budget
- A financial plan outlining projected income and expenses over a specific period.
- Bylaws
- Rules adopted by an organization to guide its governance and operations.
C
- Cash Basis Accounting
- A method of accounting that recognizes income and expenses at the time money is received or paid, rather than when they are incurred.
- Cash Flow
- The movement of cash in and out of the organization over time.
- Cash on Hand / Cash Box / Petty Cash
- Cash withdrawn from the checking account to be used for change or small expenses.
- Charitable Solicitation Registration
- The process of registering with state agencies to legally solicit donations from the public.
- Chart of Accounts
- A structured list of all financial accounts used by an organization for bookkeeping and financial reporting.
- Clearing Account / Merchant Account
- Accounts such as PayPal, Square, or Stripe, used to process payments.
- Compliance
- Adherence to laws, regulations, and internal policies governing nonprofit operations, including tax filings, governance, and financial reporting.
- Contractor
- A 1099 worker, freelancer, or independent contractor who completes specific jobs or assignments but is not an employee of the organization.
- Contributions
- Donations from individuals, corporations, or other entities.
D
- Deductions
- Tax benefits given to donors who contribute to a 501(c)(3) nonprofit, allowing them to reduce their taxable income.
- Depreciation
- The gradual reduction in the value of tangible assets over time.
- Directors & Officers Insurance (D&O)
- A type of liability insurance that protects board members and executives from legal claims related to their management of the organization.
- Donation
- A voluntary contribution of money, goods, or services given to a nonprofit organization to support its mission.
- Donation Receipt
- A formal acknowledgment provided to donors, documenting their contribution for tax deduction purposes.
E
- E-Postcard
- Another term for Form 990-N, the simplified annual tax filing for small nonprofits.
- EIN (Employer Identification Number)
- A unique number assigned to a business by the IRS for tax reporting purposes.
- Embezzlement
- The theft or misappropriation of funds by someone entrusted with managing an organization’s finances.
- Endowment
- A fund where the principal is invested, and the earnings are used for specific purposes.
- Expenses
- Costs incurred to run the organization and its programs.
F
- Fiduciary Responsibility
- The legal obligation to manage the organization’s funds responsibly.
- Financial Statement
- A formal record of the financial activities and position of the organization. These statements provide transparency and accountability to stakeholders, including donors, grant makers, board members, and regulatory bodies.
- Financial Year
- A 12-month accounting period. Non-profits may follow a calendar year (January-December) or a fiscal year (e.g., July-June).
- Fraud
- Intentional deception or misrepresentation in financial reporting, donations, or spending for personal or unauthorized gain.
- Fund Accounting
- A bookkeeping method used by non-profits to track funds assigned to different purposes and how they are spent.
- Fundraising
- Activities and campaigns undertaken by a nonprofit to solicit donations from individuals, corporations, or grant makers.
- Fundraising Expenses
- Costs incurred to raise funds for the organization.
G
- GAAP (Generally Accepted Accounting Principles)
- The standardized framework of accounting rules and procedures used in the U.S. to ensure financial statements are consistent, transparent, and comparable.
- Grants
- Funds provided by foundations, government agencies, and other organizations for specific projects or purposes.
- Gross Receipts
- The total amount of money an organization receives from all sources during an accounting period, before deducting any costs or expenses.
H
I
- IRS Form 990
- An annual tax filing required for most non-profits in the U.S.
- In-Kind Contributions
- Non-monetary donations such as goods or services.
- Incorporation
- The legal process of forming a corporation, which includes filing Articles of Incorporation and establishing the entity as a separate legal entity.
- Insurance
- Policies that protect a nonprofit from various risks, such as liability, property damage, or fraud.
J
- Journal Entry
- An accounting entry used to record transactions in accrual accounting. MoneyMinder, a cash basis accounting software, does not use journal entries.
K
L
- Liabilities
- Money owed by an organization, such as credit card debt or bank loans.
- Liquidity
- The availability of cash or assets that can quickly be converted to cash.
M
- Matching Gifts
- Donations made by a company to match its employees’ contributions.
- Membership Dues
- Fees collected from members of the organization.
N
- Net Assets
- The difference between total assets and total liabilities, often referred to as the “fund balance” in non-profits.
- Nonprofit / NPO / Not-for-Profit
- An organization that operates for purposes other than making a profit. Any surplus revenue is reinvested into the organization’s mission rather than distributed to owners or shareholders
O
- Overhead
- Administrative and operational costs necessary to run the organization.
P
- Pledges
- Promises from donors to give a specific amount in the future.
- Profit & Loss (P&L)
- Also known as the Income Statement, this financial report details an organization’s revenues, expenses, and net profit or loss over a specific period.
- Program Expenses
- Costs directly related to the organization’s programs and services.
- Program Revenue
- Income earned from programs, such as fees for services or event registrations.
Q
R
- Reconcile
- The process of comparing accounting records to bank statements to ensure accuracy, sometimes referred to as “balancing your checkbook.”
- Reinstatement
- The process of restoring a nonprofit’s legal and tax-exempt status after it has been revoked or dissolved due to noncompliance.
- Restricted Funds
- Donations or grants designated by the donor for a specific purpose or program.
- Revenue
- Income generated by the non-profit through donations, grants, events, or other sources.
S
- Spending Rules
- Guidelines that dictate how nonprofit funds can be used, ensuring they align with the organization’s mission and legal requirements.
- Standing Rules
- Operational guidelines that supplement bylaws and help manage day-to-day activities.
- Statement of Activities
- A report showing revenue and expenses over a specific period, similar to an income statement.
- Statement of Financial Position
- A financial report detailing the organization’s assets, liabilities, and net assets, similar to a balance sheet.
- Sustainability
- The ability to maintain financial health and operations over time.
T
- Taxes
- Levies imposed by the government on income, purchases, and other financial activities. While nonprofits are tax-exempt from federal income tax, they may still have tax obligations (e.g., payroll taxes, unrelated business income tax).
- Transactions
- Deposits, withdrawals, and transfers recorded in the bank register.
- Treasurer
- The officer responsible for managing an organization’s financial matters, including budgeting, accounting, reporting, and ensuring financial compliance.
U
- Unrestricted Funds
- Donations or grants that can be used at the discretion of the non-profit.
V
W
X
Y
Z
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Connect your Bank, Paypal and Square accounts to MoneyMinder PRO to directly download transactions, saving you time and effort. You just review the transactions to ensure they are properly categorized and fill out any required fields.
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