Set Up a Nonprofit Chart of Accounts (Free Template)

by | Feb 25, 2022

If you’re brand new to nonprofit accounting, the Chart of Accounts might be the best place to start. Because even if you only have one bank account, bill, investment, or expense, you’ll need one.

What is a Chart of Accounts?

It’s a list of the accounts you use in your organization to track your financial transactions. Specifically, it tracks your assets, liabilities, income, expense, and equity. 

You don’t record any financial data in the Chart of Accounts itself; it’s like an organizational map of your accounting structure.

In a nonprofit’s Chart of Accounts, each account is identified in four ways: number, name, category type, and a short description. But the first two, number and name, determine the overall structure and organization of accounts and subaccounts.

How to Organize a Nonprofit Chart of Accounts 

A well-organized Chart of Accounts helps people outside your organization (like your CPA or a bank) easily read your books.

For that reason, your account numbering, category names, and structure should follow standard guidelines and numbering conventions established by Generally Accepted Accounting Principles (GAAP). 

Those number and name conventions are as follows: 

Assets-1000s
Liabilities-2000s
Equity-3000s
Revnue-4000s
Expenses-5000s+

Pro-tip: Expenses are the only category that (typically) include more than one number range. Mid-size or larger organizations might use 5000s-9000s as expense categories. 

When numbering accounts, keep things simple and group similar accounts together. 

For example, you don’t need separate accounts for different types of office supplies (pens, paper, markers). But, you might want to have breakroom supplies or office equipment listed next after office supplies. 

Your financial reports will be organized according to the accounts in your Chart of Accounts. So it will be much easier to make sense of them if you list accounts in a logical order.

chart_of_accounts_numbering

What goes on the Chart of Accounts?

Every chart of Accounts should have the same five categories, in this order: Assets (1000s), Liabilities (2000s), Equity (3000s), Income (4000s), and Expenses (5000s+).

Here’s how that works for each account category.

1000: Assets

Assets are anything your organization owns, like cash in your bank account, accounts receivable, inventory, or fixed assets.

You’ll need to create a separate account for each individual checking or savings account.

Here’s how this would look on your Chart of Accounts:

Account # Account Description Type Description
1000 Checking Acct #1 Bank Rename with your bank account and account number
1001 Checking Acct #2 Bank Rename with your bank account and account number
1010 Savings Acct #1 Bank Rename with your bank account and account number
1100  Accounts Receivable Accounts Receivable Money owed for program service fees 
1110 Pledges Receivable Accounts Receivable Promises made by donors to give contributions
1500 Furniture and Equipment ‘ Fixed Assets Furniture and equipment with useful life exceeding one year 

 

2000: Liabilities

A liability is anything you owe to other people or companies, including accounts payable, credit cards, and short-term or long-term debt. Your Chart of Accounts will be unique to your organization, but here’s an example of what it might look like:  

Account # Account Description Type Description
2000 Accounts Payable Accounts Payable For normal bills due to others
2100 Credit Card Credit Card Rename with your Credit Card bank name and account number
2310 Accrued PTO Other Current Liabilities Unpaid paid time off including sick leave and vacation 
2700 Notes or Mortgage Payable  Long-Term Liability  Long-term notes, mortgages, or capital leases

 

3000: Equity / Net Assets

Equity is referred to as Net Assets in the nonprofit world. But no matter which name you use, it’s the accumulation of any surpluses (profit) that your organization has built up over time.

You calculate your equity by subtracting your liabilities from your assets. This calculation is called “the accounting equation,” and it’s the central principle behind all double-entry accounting systems.

Following GAAP rules regarding fund accounting, your nonprofit organization will need separate accounts for donor-restricted and unrestricted net assets.

Here’s how the Equity section might look on your Chart of Accounts:

Account # Account Description Type Description
3000 Opening Balance Equity
3100 Unrestricted Net Assets Equity Accumulated surplus that is not restricted for any purpose
3200 Temporarily Unrestricted Net Assets Equity Accumulated surplus that is held for a purpose or time
3300 Permanently Restricted Net Assets Equity Accumulated surplus held in permanently 

 

4000: Income / Revenue

Revenue (or income) is all money coming into your organization, including contributions, pledges, grants, and revenue. You should separate contributions by source (individual, federated funds, corporate gifts, government grants). And also, create separate accounts for program service fees, in-kind, special event revenue, and other miscellaneous income. 

The Revenue section of a Nonprofit Chart of Accounts may look like this example below. Feel free to add any additional accounts or sub-accounts you may need to keep track of your various sources of revenue.

Account # Account Description Type Description
4000 Individual Contributions Income Cash donations from individuals 
4200  Federated Contributions Income Contributions from federated campaigns (like United Way) 
4300 In-Kind Services and Goods Income Value of donated goods and services 
4500 Special Event Revenue Income Revenue generated at special events 
4700 Membership Revenue Income Earned revenue from sales of annual memberships

 

5000-9000: Expenses

Expenses are the money you spend, including operational expenses like salaries and rent and everyday expenses like office supplies and postage. 

Pro tip: Notice that Expenses is the only category that uses multiple number categories. Leave plenty of room to add new expenses down the road. One way to do this is to use a new number range for each expense category, like Employee Wages and Benefits (5xxx), Operational Expenses (6xxx), etc. 

The expenses portion of a Chart of Accounts might look something like this: 

Account # Account Description Type Description
5000 Salaries and Wages Expense Cost of payroll including salary and wages
5200  Payroll Taxes Expense Employer portion of payroll taxes 
6100 Professional Development Expense Training and development of staff and volunteers
6300 Printing and Postage Expense Printing and postage of correspondence, appeals, etc. 
6600 Rent Expense Rent of office and equipment
7100 Insurance  Expense Cost of liability, property, etc. insurance
8100 Interest Expense Interest expense incurred as a result of leases or debt
8300 Gain/Loss on Sale of Assets Expense Gain or loss resulting from the sale of property or equipment

Download the Nonprofit Chart of Accounts Template!

Now, let’s put each of those 5 required categories together to get a full look at a nonprofit Chart of Accounts. 

If you’re ready to create a Chart of Accounts for your nonprofit, you can start with this template, made for you to customize by The Charity CFO. 

nonoprofit_chart_of_accounts_template

Click to access the template

Use it as a guide. If you don’t need all of these accounts, you don’t need to create them today. And you may need to add others you don’t see here. But following this basic structure should give you a strong starting point for your organization.

It’s available as a shared spreadsheet through Google Sheets by clicking here.

Or you can download is as either an Excel spreadsheet or a PDF:

Control Alt Achieve: Emoji Writing Prompt Generator with Google Sheets Click here to download the Excel Spreadsheet

Archivo:PDF file icon.svg - Wikipedia, la enciclopedia libre Click here to download the PDF version

Chart of Accounts and Nonprofit Financial Statements 

Your Chart of Accounts is the foundation for any accounting system. So the accounts on your Chart of Accounts will appear on your financial statements, like the Statement of Financial Position (balance sheet) and Statement of Activities (income statement).

But, not every section of the Chart of Accounts will be used on these statements. 

The income statement uses the revenue (4000-4999) and expense (5000+) sections.

The Balance Sheet includes Assets (1000-1999), Liabilities (2000-2999), and Equity/Net Assets (3000-3999) accounts.

Get Started with Nonprofit Accounting

You should now have a good starting point for understanding and creating a Chart of Accounts for your nonprofit.

But the Chart of Accounts is just the structure for organizing your accounting data. Now you’ll need to fill those accounts with all your financial data and keep them up to date week after week and month after month.

And use that data to create financial statements to share with donors and run your business effectively.

So if you’re ready to turn your chart of accounts into a living accounting system, we’d recommend you start with our free masterclass on nonprofit accounting and reporting.

It’s a great primer on nonprofit accounting, designed for non-accountants like exec directors, founders, board members, and volunteers. 

The masterclass is 3 easy-to-understand video lessons you can watch in a single afternoon, so don’t miss it!

Click here to get free and immediate access

 

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