Blog · Board and management reporting · Finance and FP&A teams
An income and expenditure statement compares nonprofit revenue and expenses. See how the US statement-of-activities format handles donor restrictions, reconciles net assets, and supports an actual-versus-budget review.
An income expenditure statement compares a nonprofit's revenue with its expenses over a defined period. For a US nonprofit using accrual accounting, the closest reporting context is the statement of activities, which explains the change in net assets. Start with the approved accounting export, distinguish donor restrictions, and compare actual results with a budget prepared on the same basis.
The central relationship is straightforward:
Change in net assets = Revenue and other recognized increases minus expenses and other recognized decreases.
For the simplified example below, there are no gains, losses, or other changes beyond the listed revenue and expenses. A positive change is a surplus for the period; it is not a distribution to owners.
A useful management report shows revenue sources, major expense groups, donor restriction categories, and the bridge from opening to closing net assets. Keep the reporting period, legal entity, and accounting basis visible above the table. A consolidated group needs its approved entity eliminations before comparison; the separate consolidated income statement article covers that boundary.
US nonprofit reporting distinguishes net assets with and without donor restrictions. The IRS Form 990 balance sheet also uses those categories for organizations following FASB ASC 958. A board designation is an internal decision and should not be mislabeled as a donor restriction.
Use the closed general ledger or approved statement export, the donor restriction schedule, and the matching budget. Each transaction needs a posting date, account, signed amount, reporting category, and restriction classification. Retain the original row identifier so an unexpected variance can be traced back to its source.
The donor restriction schedule supplies approved releases. It should identify the relevant award or gift, the restriction, the amount released, and the accounting approval. The finance analyst compares these supplied classifications; a budget worksheet should not decide when a grant becomes recognized revenue.
Use accrual revenue and expenses consistently. Cash receipts are not automatically revenue for that period, and buying equipment is not automatically an expense of the same amount. The broader nonprofit financial statements guide explains where the other statements fit.
Harbor Youth Services, an illustrative US nonprofit, reviews its year ended December 31, 2026. All amounts below are USD, shown as whole dollars without rounding. The controller has approved the revenue classifications and a release of $160,000 from donor restrictions.
| Activity | Without donor restrictions (USD) | With donor restrictions (USD) | Total (USD) |
|---|---|---|---|
| Contributions | 900,000 | 200,000 | 1,100,000 |
| Program service revenue | 250,000 | 0 | 250,000 |
| Investment income | 10,000 | 0 | 10,000 |
| Net assets released from restrictions | 160,000 | -160,000 | 0 |
| Revenue and releases | 1,320,000 | 40,000 | 1,360,000 |
| Program expenses | 950,000 | 0 | 950,000 |
| Management and general expenses | 170,000 | 0 | 170,000 |
| Fundraising expenses | 140,000 | 0 | 140,000 |
| Total expenses | 1,260,000 | 0 | 1,260,000 |
| Change in net assets | 60,000 | 40,000 | 100,000 |
Total revenue is $1,100,000 + $250,000 + $10,000 = $1,360,000. Expenses total $950,000 + $170,000 + $140,000 = $1,260,000. The resulting increase in net assets is $100,000.
The $160,000 release contributes nothing to total revenue: $160,000 plus negative $160,000 equals zero. Counting the positive release again in the total column would overstate the organization's result.
The expense rows here summarize function. The separate statement of functional expenses reconciles those functions against natural accounts such as salaries and occupancy; it answers a different reporting question.
The activity report must explain the movement in net assets. For this example, the approved opening balances and resulting closing balances are:
| Reconciliation | Without donor restrictions (USD) | With donor restrictions (USD) | Total (USD) |
|---|---|---|---|
| Opening net assets | 300,000 | 180,000 | 480,000 |
| Change from the activity table | 60,000 | 40,000 | 100,000 |
| Closing net assets | 360,000 | 220,000 | 580,000 |
The proof is $480,000 + $100,000 = $580,000, with each restriction category also reconciling. Compare the closing amounts with the approved balance sheet. If other recognized changes exist, show them explicitly rather than forcing this simplified bridge to balance.
The IRS instructions for Form 990 include a reconciliation of net assets and explain adjustments between financial statements and return reporting. That distinction matters: a management activity report is not automatically a completed tax return, and differences require an explained bridge.
Assume the approved budget contains the following amounts. Variance means actual minus budget throughout; expense increases therefore have the opposite management interpretation from revenue increases.
| Line | Budget (USD) | Actual (USD) | Variance (USD) |
|---|---|---|---|
| Contributions | 1,050,000 | 1,100,000 | 50,000 |
| Program service revenue | 280,000 | 250,000 | -30,000 |
| Investment income | 10,000 | 10,000 | 0 |
| Total revenue | 1,340,000 | 1,360,000 | 20,000 |
| Program expenses | 900,000 | 950,000 | 50,000 |
| Management and general expenses | 180,000 | 170,000 | -10,000 |
| Fundraising expenses | 130,000 | 140,000 | 10,000 |
| Total expenses | 1,210,000 | 1,260,000 | 50,000 |
| Change in net assets | 130,000 | 100,000 | -30,000 |
The result is $30,000 below budget because the $20,000 revenue improvement is outweighed by $50,000 of additional expenses. Program leadership owns the explanation for the program spending increase; development owns the contribution and fundraising explanation. The controller checks whether timing, classification, or genuine operating changes drove each variance.
This total view does not establish unrestricted spending capacity. Review the restriction columns and relevant cash information before approving additional commitments.
Bring your approved revenue and expense export, budget, and donor restriction classifications as a file. Covirage maps the columns, its tools compute and check the comparisons, and the external AI model explains the results with every figure traced to its rows. Create a free Covirage account and bring a sample of your own data; creating the account takes about a minute.
See Covirage for finance teams for the wider reporting context.
They serve a similar management purpose, but the terminology and presentation depend on the reporting framework. For a US nonprofit, use the statement-of-activities context and the organization's approved accounting policies. Do not import a foreign statutory format because the report has a similar name.
No. Under accrual accounting, revenue can include unpaid receivables and expenses can include depreciation or unpaid bills. Donor restrictions can also limit the use of resources. Review the cash flow statement and liquidity information before treating a surplus as money available to spend.
A release moves an amount from net assets with donor restrictions to net assets without donor restrictions when the relevant restriction is satisfied. It changes the presentation between those categories but does not create additional revenue for the organization as a whole.
The controller or designated accounting owner should approve the close, revenue recognition, donor restriction classifications, and any allocations. The finance team can then compare the approved report with the budget. Program managers should explain operating variances within that agreed accounting basis.