A chart of accounts is a listing of all the accounts in a business and the debits and credits to each account. The chart of accounts for a nonprofit organization is similar, but there are some key differences that should be taken into account when setting up the chart. In this article, we will outline what a chart of accounts is, how to create one for your nonprofit organization, and provide a template and example for reference.
What Is a Chart of Accounts?
A chart of accounts is a tool used by businesses and nonprofits to keep track of financial transactions, as shown in nonprofit financial statements. It is a listing of all the accounts in an organization and the debits and credits to each account. The chart of accounts is used by organizations to record and track financial transactions, providing a structured and organized system for managing their financial data.
A chart of accounts consists of three parts:
- The account number
- The account name
- The account type
The account number is used to identify the account. The account name is used to describe the account. The account type is used to classify the account. There are four types of accounts: assets, liabilities, equity, and income.
How to Create a Chart of Accounts
Creating a chart of accounts for your nonprofit organization is not difficult, but there are some key considerations that should be taken into account. The following list outlines the steps to take when creating a chart of accounts for your non-profit organization:
- Decide on the structure of your chart of accounts: The first step is to decide on the structure of your chart of accounts. There are two main ways to structure a chart of accounts: by function or by type.
- Classify your accounts: The next step is to classify your accounts into one of the four types: assets, liabilities, equity, or income.
- Assign account numbers: Once you have classified your accounts, you will need to assign account numbers to each account.
- Determine the reporting period: The last step is to determine the reporting period for your chart of accounts. The reporting period is the time frame in which financial transactions are reported.
Organizations typically use accounting software to record and track their financial transactions. There are many different types of accounting software available, but the two most popular are QuickBooks and Sage. Utilizing software will make it easier to create and maintain your chart of accounts.
Template for a Chart of Accounts
Below is a template you can use to create your chart of accounts.
Account Number Account Name Account Type
1000 Assets Asset
2000 Liabilities Liability
3000 Equity Equity
4000 Income Income
5000 Expenses Expense
6000 Other Income streams not captured elsewhere in the chart of accounts.
Sample Chart Of Accounts
Below is a sample chart of accounts for a non-profit organization. The chart of accounts is organized by type.
Account Number Account Name Account Type
1010 Event Donations Assets
1020 Individual Donations Assets
1030 Corporate Donations Assets
1040 Grants Assets
1050 Investment Income Assets
2000 Accounts Payable Liabilities
3000 Accrued Expenses Liabilities
4000 Unrestricted Net Assets Equity
5000 Temporarily Restricted Net Assets Equity
6000 Permanently Restricted Net Assets Equity
7000 Revenues Income
8000 Expenses Expense