Asset & Cash Management

Net Assets

The net assets section of a nonprofit's statement of financial position reports totals for each of the following classifications:

Unrestricted net assets
Temporarily restricted net assets
Permanently restricted net assets

Unrestricted Net Assets

If a donor does not specify a restriction on his or her contribution, the amount received by the nonprofit is recorded as an asset and as unrestricted contribution revenues. Unrestricted contribution revenues (reported on the statement of activities) also cause the amount of unrestricted net assets to increase.^[1]

Temporarily Restricted Net Assets

If a nonprofit receives a contribution that has a donor-imposed restriction (other than to be held in perpetuity), the amount is usually recorded as an asset and as temporarily restricted contribution revenues. Temporarily restricted contribution revenues (reported on the statement of activities) also cause the amount of temporarily restricted net assets to increase.^[2]

Permanently Restricted Net Assets

If a donor stipulates that her contribution must be held by the nonprofit in perpetuity (forever, not be used up), the amount is recorded as an asset and as permanently restricted contribution revenues. Permanently restricted contribution revenues (reported on the statement of activities) also cause the amount of permanently restricted net assets to increase. ^[3]

Net Assets Diagram

Credit Balance	Unrestricted	Undesignated Surplus (Deficit) Board Designated For Project For Cash Reserve For Acquisition For Quasi-Endowment Property & Equipment Fixed Assets Net of Long-Term Debt
Temporarily Restricted	Purpose Restriction For Project For Function For Capital Purchases Time Restriction For Future Fiscal Year (imposed by donor)
Permanently Restricted	Purpose Restriction Endowment (imposed by donor)

Credit Balance

Unrestricted

Undesignated

Surplus (Deficit)

Board Designated

For Project
For Cash Reserve
For Acquisition
For Quasi-Endowment

Property & Equipment

Fixed Assets Net of Long-Term Debt

Temporarily Restricted

Purpose Restriction

For Project
For Function
For Capital Purchases

Time Restriction

For Future Fiscal Year (imposed by donor)

Permanently Restricted

Purpose Restriction

Endowment (imposed by donor)

Cash Management & Cash Flow

SEE ALSO: Statement of Cash Flows

Cash is ready money in the bank or in the business. It is not inventory, it is not accounts receivable (what you are owed), and it is not property. These can potentially be converted to cash, but can't be used to pay suppliers, rent, or employees.

Cash flow refers to the movement of cash into and out of a business. Watching the cash inflows and outflows is one of the most pressing management tasks for any business. The outflow of cash includes those checks you write each month to pay salaries, suppliers, and creditors. The inflow includes the cash you receive from customers, lenders, and investors.^[4]