The short answer
Nonprofit bookkeeping in Arizona means tracking money by purpose, not just by category. AZ Easy CPA helps nonprofits separate net assets with and without donor restrictions, track grants, allocate functional expenses, prepare the Statement of Financial Position and Statement of Activities, and keep records ready for the Form 990 preparer.
How is nonprofit accounting different from business bookkeeping?
A business tracks profit. A nonprofit tracks whether money was used for the purposes donors and grantors intended. That means following donor restrictions, reporting expenses by function (program, management and general, fundraising) and using nonprofit financial statements with different names and layouts than a business uses.
Much of the day-to-day work looks familiar: recording deposits, paying bills and reconciling bank accounts every month. The difference is the extra layer of information attached to each dollar. A gift for the scholarship fund cannot quietly pay the rent, and your books need to show that clearly.
| Business term | Nonprofit term |
|---|---|
| Balance sheet | Statement of Financial Position |
| Income statement (profit and loss) | Statement of Activities |
| Owner's equity | Net assets (with and without donor restrictions) |
| Net income | Change in net assets |
| Expenses by type | Expenses by nature and by function |
What are net assets with and without donor restrictions?
Under the current nonprofit reporting standard (ASU 2016-14), net assets fall into two classes. Net assets without donor restrictions can be used for any purpose the board approves. Net assets with donor restrictions must be used for a specific purpose or time period the donor set, until that restriction is met.
You may still hear the older terms unrestricted, temporarily restricted and permanently restricted. Since ASU 2016-14, those were combined into the two classes above, and that is how your financial statements should present them.
- Without donor restrictions: general donations, event income, program fees and other money the board can direct. Board-designated funds still belong here, because the board, not a donor, set the designation.
- With donor restrictions: gifts for a specific program, a future year or a capital project, plus endowment gifts the donor intends to be held long term.
When you spend restricted money on its intended purpose, the restriction is released and the amount moves to net assets without donor restrictions. We record those releases each month so your reports show what is truly available to spend.
Keep the donor's letter, pledge form or grant agreement with every restricted gift. The wording in those documents is what tells us how to record it.
How do you handle fund accounting and grant tracking?
We set up your books so every restricted gift and grant can be tracked separately, from the money received to the expenses charged against it. That way you can show any funder exactly how their money was spent and how much remains, without rebuilding spreadsheets every time a report is due.
Fund accounting simply means tracking money in separate buckets based on its purpose. In QuickBooks, we usually do this with classes, locations, projects or tags, depending on how many funds and grants you manage and how your funders want reports.
- A separate tracking code for each grant or restricted fund
- Grant budgets loaded so you can compare spending to the approved budget
- Grant periods and reporting deadlines noted so nothing sneaks up on you
- Expenses coded to the right grant when they are recorded, not months later
- Clear support for allocated costs like shared staff time or rent
- Reports ready for funder reporting and grant renewals
Some grants are paid upfront, and some reimburse you after you spend. Each is recorded differently, and we keep track of what has been received, spent and is still owed to you.
What are functional expenses and why do they matter?
Functional expenses show what you spent money on by purpose: program services, management and general, and fundraising. Nonprofits following GAAP report this breakdown, and the Form 990 asks for it too. Donors, grantors and board members also look at it to understand how resources are used.
Some expenses belong to one function, like supplies for a youth program. Others are shared, like an executive director's salary or office rent, and need a reasonable allocation method. We help you choose a method you can explain, such as time records for staff or square footage for space, and apply it consistently.
| Function | What it includes | Examples |
|---|---|---|
| Program services | Work that carries out your mission | Program staff, client supplies, event costs for a program |
| Management and general | Running the organization overall | Accounting, insurance, board meetings, general office |
| Fundraising | Raising money from donors and funders | Donor mailings, fundraising software, grant writing |
What reports will my nonprofit board receive?
We prepare board-ready monthly or quarterly reports: a Statement of Financial Position, a Statement of Activities, budget compared to actual, and a summary of restricted funds and grants. Chris can also walk your treasurer or finance committee through the numbers so questions get answered before the board meeting.
Board members come from all kinds of backgrounds, and many are not accountants. Good board reports are short, consistent from month to month and answer the questions people actually ask: Are we on budget? How much cash do we have? How much of it is restricted?
- Statement of Financial Position: what the organization owns and owes, with net assets by class
- Statement of Activities: revenue, expenses and change in net assets for the period
- Budget vs. actual: by program or for the whole organization
- Restricted funds and grants summary: balances, spending and remaining amounts
- Cash summary: available cash compared to restricted amounts
How do you record in-kind donations?
In-kind donations are gifts of goods, services or the use of space instead of cash. Donated goods and space are generally recorded at fair value. Donated services are recorded only when they meet specific criteria, such as specialized skills you would otherwise pay for. We help you document and record each type properly.
Common examples include donated food or supplies, free use of a building, auction items and professional services like legal or accounting work. These often get missed or recorded inconsistently, which can understate both your revenue and your expenses.
- A simple intake form to record what was received, when and its estimated value
- Separate tracking for in-kind gifts so they show up correctly on reports
- Presentation and disclosure consistent with current nonprofit reporting rules
- Volunteer hours tracked for your own records, since general volunteer time usually is not recorded as revenue
Do you prepare the Form 990?
No. A trusted partner prepares the Form 990. Our job is to keep your books organized and complete so your 990 preparer has what they need: functional expenses, revenue by source, restricted fund activity, contributions detail and year-end balances that tie to your financial statements.
The 990 is a public document, and donors, grant makers and watchdog sites read it. A clean set of books makes it far easier to file on time and accurately. We coordinate with your preparer through our trusted partners, and payroll for nonprofit staff runs through partners as well.
We also help organizations get ready when a funder or state threshold calls for a review or audit by an outside firm. That means reconciled accounts, organized support and schedules prepared in advance. If a funder accepts compiled financial statements, we can prepare those.
Can you set up QuickBooks for a nonprofit?
Yes. Chris is a QuickBooks ProAdvisor (Elite tier) and can set up QuickBooks Online for nonprofit use: a nonprofit chart of accounts, classes or locations for programs and functions, tracking for grants and restricted funds, and donor and pledge tracking that ties into your reports.
A good setup at the start saves a lot of cleanup later. We build the chart of accounts around how your organization works and how your funders report, then connect bank feeds and donation platforms where possible.
We also train your staff or volunteers on the day-to-day tasks, like recording deposits and coding expenses to the right program. See our QuickBooks setup and QuickBooks training pages for more detail. We work with nonprofits in Chandler and across Arizona, remotely or in person.
How do we get started?
Free phone call
Tell us about your organization, your funding sources and what your board and funders need from you.
Review your records
Chris looks at your current books, grant agreements and reports to see what is working and what needs attention.
Set up or clean up
We build or adjust your chart of accounts, fund and grant tracking and functional expense allocations.
Monthly bookkeeping
We record, reconcile and release restrictions every month, then prepare board-ready reports.
Year-end readiness
We prepare schedules and coordinate with your Form 990 preparer and any outside reviewer or auditor.
Nonprofit Accounting questions
Can a small nonprofit use QuickBooks Online?
Yes. With the right chart of accounts and class or location tracking, QuickBooks Online works well for many small and mid-sized nonprofits. We can set it up and train your team to use it.
What happened to temporarily restricted and permanently restricted net assets?
Under ASU 2016-14, those categories were combined into net assets with donor restrictions. Unrestricted net assets are now called net assets without donor restrictions.
Do you prepare our Form 990?
No. A trusted partner prepares the 990. We keep your books organized and provide the information the preparer needs, including functional expenses and contributions detail.
Can you help us get ready for an audit or review?
Yes. We help get accounts reconciled, schedules prepared and support organized before an outside firm begins. AZ Easy CPA does not perform audits or reviews itself.
How do you track a grant that reimburses us after we spend?
We record the expenses to that grant as they happen and track the amount you are owed until the funder pays. That way you can see what has been spent, billed and collected at any point.
Can you present reports to our board?
Chris can meet with your treasurer or finance committee to walk through the reports, and he can join a board meeting when that is helpful. We keep the reports short and in plain language.
How is nonprofit bookkeeping priced?
Pricing depends on transaction volume, the number of funds and grants and how much reporting you need. We quote it after a free phone call so you know what is included.
Bookkeeping near you
From our Chandler office we work with businesses across the East Valley and Arizona, in person or online.
