How to Establish a Chart of Accounts
A COA, or Chart Of Accounts, operates as the backbone to all accounting procedures. It is a spreadsheet manipulated and personalized to include everything your nonprofit does financially, and nothing it doesn’t. However, it does not begin this way. The Unified Chart of Accounts (UCOA) was created as a standardized chart of accounts for nonprofit use. By using the UCOA you will have information needed to easily translate your accounting records into the categories required by the IRS Form 990. However, it is comparable to killing a mosquito with a sledgehammer, as the UCOA is too detailed for many nonprofits. Creating one suited to your organization is the better option.
When creating your COA account numbers use the following guide:
The amount of subaccounts you have will help determine how many digits your account numbers are. You can use four to seven numbers for each account. For example, a smaller organization may choose to have four digit accounts 1000-9000 because they have fewer accounts.
A COA will have several major categories. These major categories will act as headers for your minor categories, and usually sort your financial information into revenue, expenses, assets, liabilities, and net assets.
Assets- Include cash (bank Accounts, petty cash, paypal), accounts receivable, investments, and prepaid expenses, accrued revenues, inventory, fixed assets, and net of accumulated depreciation.
Liabilities- Include accounts payable, accrued liabilities-(payroll, other), and credit cards.
Net assets- Include unrestricted net assets, temporarily restricted net assets, and permanently restricted net assets.
Is the amount of money brought into a company by its business activities. Non-profit organizations earn income/revenue by providing a service. Other sources of revenues include interest on investments and contributions.
Direct Contributions include (individual donations, board donations, corporate donations), Donated Goods and Services (professional services, facilities, gifts in kind), Non-governmental grants (corporate, foundation, NPO), Government grants (Federal, State, Local)
Government Agencies (Federal, State, Local), Program service fees, Revenue from investments (interest, dividends, realized gain (loss), Special Events
Are costs that a business incurs through its operations to earn revenue.
Examples include grants to other organizations, salaries & related expenses, contract service expenses (legal, accounting, etc.), non-personnel expenses (supplies, telephone, postage, etc.), facility & equipment, travel & meeting, and other (client specific, membership dues, bank fees, etc.)
Once you have a good draft of your COA pull out an IRS Form 990 and look at your revenue and expense accounts to make sure you have all the information you will need to complete the form. Your accounts do not have to have the exact names as the Form 990 as long as you know where they correspond on the form
How to turn account numbers: https://qboe.custhelp.com/app/answers/detail/a_id/1117/kw/chart%20of%20accounts/r_id/103898
Merging accounts: https://qboe.custhelp.com/app/answers/detail/a_id/1221/kw/merging%20accounts/r_id/103898#ext_accounts
Deleting special and default accounts: https://qboe.custhelp.com/app/answers/detail/a_id/1221/kw/merging%20accounts/r_id/103898#ext_accounts
IRS Form 990 can be found at: