The Nonprofit Chart of Accounts: A Guide to Organizing Your Finances

Managing a nonprofit’s finances requires clear organization, transparency, and compliance with accounting best practices. One of the most essential tools for nonprofit financial management is a Chart of Accounts (COA)—a structured list that categorizes every financial transaction your organization makes.

What Is a Chart of Accounts?

A Chart of Accounts (COA) is an organized listing of financial accounts that records your nonprofit’s assets, liabilities, income, and expenses. Think of it as a roadmap for your financial transactions, allowing you to categorize revenue and expenses correctly.

Each account in the COA is assigned a unique account number, making it easier to track transactions and prepare financial statements.

Example COA Categories: 

• Assets (Cash, Accounts Receivable, Property & Equipment) 

• Liabilities (Loans, Accounts Payable, Grants Payable) 

• Net Assets (Unrestricted, Temporarily Restricted, Permanently Restricted) 

• Revenue (Donations, Grants, Membership Fees) 

• Expenses (Payroll, Rent, Program Costs, Office Supplies)

A nonprofit COA differs from a for-profit COA because it tracks restricted and unrestricted funds, ensuring compliance with donor and grantor requirements.

Why Is a Chart of Accounts Important for Nonprofits?

A well-structured COA provides clarity and accountability, helping nonprofits with:

• Grant Compliance – Tracks restricted and unrestricted funds separately to meet funder requirements. 

• Financial Transparency – Organizes transactions for clear financial reporting to donors, board members, and auditors. 

• Accurate Budgeting – Provides a structured way to monitor revenue and expenses. 

• Audit Readiness – Ensures financial records are clean, making audits smoother. 

• Program Efficiency – Helps leadership analyze program costs and make informed financial decisions.

How to Set Up a Chart of Accounts for Your Nonprofit

Step 1: Define Your Account Categories

Nonprofit financial transactions fall into five key categories: 

• Assets – What your nonprofit owns (cash, grants receivable, prepaid expenses). 

• Liabilities – What your nonprofit owes (accounts payable, deferred revenue). 

• Net Assets – Donor-restricted and unrestricted funds. 

• Revenue – Incoming funds (donations, grants, event income). 

• Expenses – Outgoing costs (salaries, rent, marketing, program costs).

Each category should be further broken down based on the nonprofit’s needs.

Step 2: Assign Account Numbers

To keep transactions organized, assign account numbers to each category:

• 1000–1999: Assets 

• 2000–2999: Liabilities 

• 3000–3999: Net Assets 

• 4000–4999: Revenue 

• 5000–5999: Expenses

Example:

• 1010 – Cash – Checking

• 1015 – Cash – Savings

• 4010 – Individual Donations

• 5020 – Payroll Expenses

Step 3: Separate Restricted and Unrestricted Funds

To comply with grant requirements and donor restrictions, nonprofits must track: 

• Unrestricted Net Assets – Funds that can be used for any purpose. 

• Temporarily Restricted Net Assets – Funds with time or purpose restrictions. 

• Permanently Restricted Net Assets – Endowments where only earnings can be spent.

This ensures that restricted funds are not mistakenly used for general expenses.

Step 4: Use Accounting Software

Popular nonprofit accounting software like QuickBooks for Nonprofits, Sage Intacct, or Aplos allows you to structure your COA correctly and track financial activity automatically.

Benefits of Using Accounting Software:

• Automates categorization of income and expenses.

• Generates reports by funding source or program.

• Reduces manual errors in financial statements.

Step 5: Maintain and Review Your COA Regularly

Your nonprofit’s financial needs evolve over time, so review your COA at least once a year. Ensure that: 

• New grants or funding sources are assigned proper account codes. 

• Redundant or unused accounts are consolidated. 

• Expense categories align with annual budgets. 

• Accounts follow Generally Accepted Accounting Principles (GAAP).

How PLUS Accounting Services Can Help

At PLUS Accounting Services, we help nonprofits: 

• Set up and structure a Chart of Accounts for clarity and compliance. 

• Ensure accurate grant and fund tracking for smooth financial reporting. 

• Integrate accounting software for automated reporting and budgeting. 

• Review and optimize COA structures to match best practices.

Need expert help organizing your nonprofit’s finances? Contact us today!

Final Thoughts: Build a Strong Financial Foundation

A well-organized Chart of Accounts is the foundation of accurate financial reporting and compliance for nonprofits. By structuring accounts properly, tracking restricted funds, and leveraging accounting tools, nonprofits can ensure financial health, transparency, and long-term success.

 Want a sample nonprofit COA template? Comment ‘COA’ below and someone from the PLUS Accounting Services will send it to you!