Speaker 1: Hey, this is Alex from Apples Academy. Today we're going to take a look at the rules and standards that your nonprofit needs to adhere to. If you've gone through our other lessons and learned how to build an accounting system, this is the lesson for you. One rule to rule them all. Accounting really only has one rule, and that's everything must balance. In lesson four, we covered debits and credits, which are the nuts and bolts of your accounting system. Every transaction you record in a double entry accounting system will have an equal debit to an equal credit. This is why double entry accounting is critical to your nonprofit. If you're able to record that you spent $50 of office supplies, but only 45 of it came out of the cash on hand, you've got an unbalanced transaction and it's going to cause some problems. Any software that you choose is going to have double entry accounting, so there's really no need to worry about it. You'll just want to pick one that has fund accounting to make sure that you keep in line with the other standards we're going to cover. Like any business or organization in the US, there are certain governing powers that put in place the rules and standards that you need to adhere to. Accounting standards in the US are made by the PCAOB, AICPA, FASB, GASB, and the IRS. If you want to know what those really mean, read the content below, because otherwise it just sounds like I'm really bad at the alphabet. The point of all of these organizations is to determine what's GAAP, G-A-A-P, which stands for Generally Accepted Accounting Principles. These guidelines are decided on and then applied to every organization in the US. Nonprofits have unique guidelines, which really boil down to your reports and tax returns. Reports, as covered in Lesson 5, are just a collection of data that you use to answer questions that people ask you, like, how much money do you have, or how much money do you have set aside for a particular fund. For nonprofits, there's three primary reports that you're going to need to generate. The first is the Statement of Financial Position, otherwise known as your balance sheet. This report illustrates the accounting equation and shows a snapshot of your organization's financial health. The second is the Statement of Activities, otherwise known as your income statement. This report shows how much money you've received, minus the money that you've spent, which results in your net income or loss for a period of time. The last report is called the Statement of Functional Expenses. This report shows not only how much money you've spent, but breaks each expense down by fund and category. So that was reports, but now what about tax returns? Yes, even though you're a nonprofit, the IRS still wants to know how much money you have. Churches are exempt from filing this return, but a nonprofit needs to file what's called the Form 990 every year. The 990 return comes in three different forms, the 990-N e-Postcard, the 990-EZ, and the Full Form 990. The Form 990 e-Postcard is required of any nonprofit with less than $50,000 in income during the year. The Form 990-EZ is required of any nonprofit with between $50,000 and $200,000 of income during the year, or less than $500,000 in assets. And the Full Form 990 is required of any nonprofit with over $200,000 in income or $500,000 in assets. This return is due on the 15th day of the 5th month of your nonprofit's fiscal year, which, if you have a January 1 fiscal year, means it's due on May 15th. What if my fiscal year starts in December? April 15th. Quick math. Do it again. May. January. I already did that. May 15th. What if my fiscal year starts in October? Uh, it'll be in, no, January. So what's next? This lesson completes our course of Intro to Nonprofit Accounting. If you've read all of our other lessons, then good on ya, but if you haven't, go back and read them. Once you've completed these lessons, you're going to understand accounting, fund accounting, know how to set up a chart of accounts, enter transactions, pull reports, set up internal controls, and adhere to the rules and guidelines that your nonprofit needs. With this understanding, you're ready to move forward managing the accounting system for your nonprofit. Until next time, this has been Alex with Applo Software. Be awesome.