Nonprofit financial statements commonly use alternative names for the two most basic financial reports.
Balance Sheet = Statement of Financial Position (Nonprofit term)
A photograph of a single day. The Balance Sheet cannot show what happened during the month or the year – it can only show how it looks on the last date in that period. This fact often leads to year-end activities designed to “beautify” the report and make it look better on the final reporting date.
The Balance Sheet shows three main categories of items:
Assets = What you own. Assets are usually money, physical things, and intangibles such as royalties or software.
Liabilities = What you owe. These are your debts that you need to pay.
Equity = Assets minus Liabilities. What’s left over that is really yours, after you subtract what you owe from what you own. Note that Equity is a concept. It does not directly correlate to specific assets. For-profits use the term equity; Non-profits use net-assets instead. (Technically you cannot have equity if you do not actually own it.)
Profit & Loss Statement (aka Income Statement) = Statement of Financial Activity (Nonprofit term)
A movie, or TV episode, of a specific time period such as a month or a year. It catches all the activities, both revenue and expense, that happen during that time. One method to “beautify” the P&L is to move activities to the Balance Sheet by lowering the total expense. For example, defining larger purchases as capital expenses. (See Depreciation for how this works.)