Basic Practice To Allocate Functional Expenses For Non Profit Accounting


Like web, a non profits organization expenses found to be in clustered form and required reporting of information and values using financial expenses classification and grouping them according to purposes.

On that note the statement of functional expenses described in matrix since it reports functional expense such as events, programs for funds raising etc. As per FASB’s issuance of Accounting Standards Update (ASU) 2016-14, Not-for-Profit Entities- all the entities have to showcase a fruitful relationship between all the function expenses of an organization(Girsch, 2021).

For financial adviser, functional expenses matrix will provide useful information and more indepth knowledge how nonprofit organization uses statements to bring out success.

Here in this blog, we are aiming to share some critical aspects of functional expenses and non profit accounting via reporting of expenses will be done affectively.

Non Profit Accounting

It is unique process by which company performs address unique expenses, plan and record expenses. A non profit accounting is aiming towards accountability aspects of accounting figures. It helps the company to accounting set of procedure and process required for decision making (Morgan, 2010)..

How Non Profit Accounting Is Different From Function Expenses

As defined by assignment writer, non-profits donors have certain rights to restricts on donation they are contributing to a non-profit organization. Their grants ensured grants will be received on time and it is being spent on agreed-upon time. This is why they are establishing a new accounting called fund accounting.

A fund accounting helps in allocating funds in different organization functions such these funds are being spent where it has been expected(CRI, 2019)

A non-profit organization separates its function in three groups-

  • Restricted
  • Temporary restricted
  • Unrestricted

Restricted funds are spent on projects and activities which are mandatory whereas unrestricted funds spend at a particular time when it is required. An unrestricted fund can be spent on whatever aspects of organization needs extra attention

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Non-Profit Accounting Statements

As per GAAP (Generally Accepted Accounting Principles), to form non-profit accounting reporting, it is necessary to adhere to GAAP principles and standards. When a financier analyzes or predicts expenses, it is needed to form expected revenues by utilizing historical figures and different calculation (AICPA, 2020)

In some other case, your expenses budget comply with different categories such as program expenses, administrative expenses, and fundraising expenses.

How To Calculate Financial Positions

A Balance sheet will be finally considered as a statement of financial positions as it represents the financial health of the organization. 

Net Assets= Assets- Liabilities

By understanding how variables of assets and liabilities work upon, a healthy financial position of the company could be easily determined.

Note- It is equally important to include appropriate references, such that schedule’s place in the footnotes seems to be clear and precise.

How Non Profit Organization Allocate Finances

According to online assignment help experts, most of the organization uses a combination of expenses and allocate them in generally two ways-

  • Direct Method- This method involves allocating each expense in a functional category as per resources direct usages(Jitasa, 2020). For instance, A non-profit organization has received a bill of $2000. If the company has 6 mobile phones among the fundraising team and 4 in offices. Then the division of expenses will be followed as

Fundraising team bill- $1200

Administrative team bill-$800 

  • Indirect Method- This method is beneficial for which expenses allocation directly could not be done easily. For instance, a non-profit organization leasing a building may be required to select square foot as a preferable way to allocate resources


In this blog, we have discussed financial expense and non-profit accounting core concepts where we came to know functional expenses should be described in matrix since it reports functional expense such as events, programs for funds raising etc. On the other side, non-profit accounting is a unique process by which company perform address unique expenses, plan and record their expenses. Later we have determined the way the company allocates resources such as direct and indirect method. We have shared ways a company can calculate financial statements and define how accounting statements are different from functional expenses.

If you wish to submit assignments on accounting issues and topics, then OmanEssay based essay writer Saham team is all set to write your assignment in limited time and budget


AICPA(2020). Functional expenses: A revised focus for not-for-profit auditors. Available at-

CRI(2019). How Nonprofits Cluster Functional Expenses on Financial Statements. Available at-

Jitasa(2020). Nonprofit Accounting: A Guide to Basics and Best Practices. Available at-

Girsch.B.M(2021). How to Allocate Functional Expenses for Your NonprofiT. Available at-

Morgan, G. G. (2010). The use of charitable status as a basis for regulation of nonprofit accounting. Voluntary Sector Review, 1(2), 209-232.

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