Income statements of financial tools are used to summarize the financial profile of a company within a specified time period. As such, the income statement usually contains an assessment of the company's expenses in relation to its profit and loss during that period under consideration. Such a financial tool is a necessary due to the fact that it helps the business stay focused by giving it a yardstick for measuring the rate of its performance. In its relation to the nonprofit, the income statement also contains information regarding the performance of that particular nonprofit organization for the period under review. The tips for the preparation of a nonprofit income statement include the analysis of the revenues and expenses, the cash flows, the liabilities and the assets of the nonprofit.
For any organization, including nonprofits, the importance of a properly prepared income statement cannot be overemphasized. Apart from the usefulness of such statements to the nonprofit organization in its effectiveness and longevity, the nonprofit income statement can also be used for applying different types of funds by nonprofits and showing donors how such nonprofit organizations are performing as well as for other purposes like tax preparations. Something that must be included in the nonprofit income statement is a list of the assets belonging to the nonprofit organization. The assets may be in the form of money, or they may be in the form of physical properties belonging to the nonprofit organization. Funds that have been promised or pledged to the organization, but have not yet been redeemed, may also be listed in a more restrictive manner as potential assets.
Under liabilities in a nonprofit income statement, the usual expenses like rent or the payment of the mortgage for the facility being used by the organization will be listed as part of such liabilities. The expenses in the nonprofit income statement will include money spent on furnishing the premises of the nonprofit as well as money spent in organizing fundraising drives, including advertisements and the printing of material utilized in the fundraising events. If the nonprofit organization has members who pay membership dues at predetermined times, these dues will be listed as part of the incoming cash flows for the optimization, in addition to any other form of income generation by the nonprofit. Under the outgoing section, the nonprofit income statement will carry expenses that may be related to the everyday operation of the nonprofit or to other factors, such as investments by the nonprofit.