Nonprofits accrue forms of revenue unique from other for-profit entities. Among these are service revenues, contributions and grants. A nonprofit’s balance sheet must reflect these particular categories. All records should be in accordance with GAAP standards for the nonprofits specialized sector.
Fee-based services to clients, patients or students are one of the most common sources of nonprofit revenue. Revenues are recorded for the services provided. These services should be recorded at their net realizable value. Net realizable value is a method of evaluating an asset’s worth while held in inventory. Occasionally, discounts are offered to clients. In those cases, the discounts must be applied against all the gross revenue being recorded.
Contributions comprise a large part of a nonprofit’s revenue. They may come in the form of cash, stock, bonds, art, property or other tangible assets with value. When donating a non-cash item, it is the donor’s responsibility to determine it’s worth, not the nonprofit’s.
A unique aspect of recording contributions is they are not only recorded when cash is received but also when a pledge is made by a donor. An organization must record a pledge receivable and contribution income even before it is actually received. A contribution given with restrictions is still recognized and recorded as income as well.
Grants can be restricted or unrestricted. Regardless of their designation, grants must be recorded at their fair market value at the time they are received. Grants are another major source of funding and are often used to supplement a nonprofit’s other forms of revenue.