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A nonprofit statement of financial position reports assets, liabilities and net assets. Compare the donor-restriction classes, reconcile changes, and distinguish the accounting surplus from resources available for general spending.
A non profit balance sheet, usually called a statement of financial position, shows what a nonprofit owns, owes and retains as net assets on a specific date. US nonprofit reporting distinguishes net assets with donor restrictions from net assets without donor restrictions. Neither class tells you how much cash is available for general spending.
The accounting identity is the starting control:
Assets = Liabilities + Net assets
Net assets = Net assets without donor restrictions + Net assets with donor restrictions
Assets include cash, receivables, investments and property. Liabilities include payables, borrowings and other recognized obligations. Net assets are the residual, not another bank account or a statement of cash the organization can distribute.
The IRS Form 990 instructions identify the two classes for organizations following ASC 958. They also explain that donor restrictions may concern purpose, time or preservation of specified assets. Board designations remain within net assets without donor restrictions, even when management treats the designated reserve as unavailable for ordinary spending.
For the overall set of reports, see nonprofit financial statements. The statement of activities explains recognized revenue and expenses; this page concentrates on the balances left at the reporting date.
Bring the opening and closing trial balances, the donor-restriction rollforward, receivables aging, investment schedule, fixed-asset schedule and cash reconciliations. Retain the accountant-approved distinction between donor restrictions and internal designations.
Use consistent reporting dates, entities and accounting policies. Map each ledger account to one financial-statement line, then attach supporting restriction and availability information. A pledge receivable may contribute to net assets while remaining uncollected for a long time. An investment may be liquid in the market but restricted to a particular purpose.
Form 990, Part X illustrates the beginning-and-end balance comparison and explicitly requires total assets to equal liabilities plus net assets or fund balances. It is a useful reconciliation reference, although a tax return's layout does not replace GAAP statements and notes.
The following illustrative organization compares December 31, 2025, with December 31, 2026. Amounts are USD, with no rounding in the dollar calculations. Receivables and property are shown at their reported net carrying amounts.
| Statement of financial position line | Opening (USD) | Closing (USD) | Change (USD) |
|---|---|---|---|
| Cash | 800,000 | 1,000,000 | 200,000 |
| Pledges and other receivables, net | 300,000 | 400,000 | 100,000 |
| Investments | 600,000 | 650,000 | 50,000 |
| Property and equipment, net | 900,000 | 850,000 | -50,000 |
| Total assets | 2,600,000 | 2,900,000 | 300,000 |
| Accounts payable and accrued expenses | 150,000 | 180,000 | 30,000 |
| Debt | 450,000 | 420,000 | -30,000 |
| Total liabilities | 600,000 | 600,000 | 0 |
| Net assets without donor restrictions | 1,100,000 | 1,300,000 | 200,000 |
| Net assets with donor restrictions | 900,000 | 1,000,000 | 100,000 |
| Total net assets | 2,000,000 | 2,300,000 | 300,000 |
| Liabilities plus net assets | 2,600,000 | 2,900,000 | 300,000 |
The closing check is 2,900,000 − 600,000 = $2,300,000 of net assets. The class check is 1,300,000 + 1,000,000 = $2,300,000. Both agree with the statement.
The $300,000 increase in net assets also equals the $300,000 increase in assets less the zero change in total liabilities. That identity verifies the totals, but it does not explain each movement. Use flux analysis to connect the changes to the supporting schedules.
Assume the approved statement-of-activities schedule supplies the following changes. Positive amounts increase the class; negative amounts reduce it.
| Net-asset rollforward | Without donor restrictions (USD) | With donor restrictions (USD) | Total (USD) |
|---|---|---|---|
| Opening balance | 1,100,000 | 900,000 | 2,000,000 |
| Recognized change before restriction releases | 150,000 | 150,000 | 300,000 |
| Restrictions satisfied and released | 50,000 | -50,000 | 0 |
| Closing balance | 1,300,000 | 1,000,000 | 2,300,000 |
The release moves $50,000 between classes. It does not itself increase total net assets or create cash. The controller confirms that the purpose or time restriction has been satisfied and that the release is recorded in the correct period.
Do not confuse a donor restriction with a condition on a contribution. Recognition of conditional awards requires a separate accounting assessment before a balance is treated as contribution revenue or a receivable. This comparison uses the balances the organization has already recognized and approved.
The closing financial assets are cash, receivables and investments: 1,000,000 + 400,000 + 650,000 = $2,050,000. Property is excluded from this financial-asset pool.
The approved availability schedule identifies donor-restricted cash of $500,000, donor-restricted investments of $250,000 and long-term donor-restricted pledges of $250,000. These total the $1,000,000 donor-restricted net-asset class in this simplified example. The board has also designated $200,000 of otherwise unrestricted cash as a reserve.
| General-spending availability calculation | Amount (USD) |
|---|---|
| Cash, receivables and investments | 2,050,000 |
| Less donor-restricted cash and investments | -750,000 |
| Less long-term donor-restricted pledges, excluded separately | -250,000 |
| Less board-designated cash reserve | -200,000 |
| Financial assets available within the coming year | 850,000 |
There is no overlap between the deductions. The remaining receivables and investments are assumed collectible or convertible to cash within the coming year and available for general spending. That assumption needs review; availability is not a promise of collection.
Cash available now is narrower: 1,000,000 − 500,000 − 200,000 = $300,000. The $850,000 measure includes receivables and investments, so it cannot replace a payment calendar. See restricted cash on the balance sheet for cash-specific classification and reconciliation.
Bring your trial-balance export, approved net-asset rollforward and availability schedule to Covirage. Covirage maps the columns, and its tools compute period changes and check supplied balances; the external AI model explains the result with every figure traced to its rows. Create a free Covirage account, which takes about a minute, then set up your business and bring a sample of your own data.
See Covirage for finance teams for the reporting context.
Net assets represent the residual after liabilities are deducted from assets. For a US nonprofit following ASC 958, the two presentation classes are net assets without donor restrictions and net assets with donor restrictions. They are not ownership interests distributed to shareholders.
A board designation alone does not make a reserve donor restricted. Such balances remain within net assets without donor restrictions. They can still be excluded from management's general-spending availability measure until the board authorizes their use.
No. Form 990 is an information return with its own balance-sheet reporting instructions. It can help identify reported asset and net-asset balances, but it does not replace the organization's GAAP financial statements, supporting notes or accounting records.
Yes. Net assets can be tied up in buildings, investments, long-term pledges or donor-restricted resources. Compare spendable cash and expected collections with upcoming obligations before assuming a positive net-asset balance can fund current programs.