How do nonprofits prepare financial statements?
Nonprofits prepare financial statements similar to for-profit organizations. They provide information pertaining to the organization's financial position, performance, and cash flow. The most commonly used financial statements for nonprofits are the balance sheet, income statement, and statement of cash flows. These statements are typically prepared at the end of each fiscal year and are audited by an independent auditor. To prepare these statements, nonprofits must maintain accurate financial records, such as ledgers, invoices, and receipts, and use accounting software or hire a professional accountant.