How to Calculate Net Assets in Statement of Activities & Changes in Net Assets

Nonprofit organizations use finances to communicate with donors, creditors and their boards of directors. Financial reporting shares information regarding the firm’s ability to manage its funds and use the money to support the organization’s mission. Donors want to see that the organization uses its money to plan activities that benefit the recipients. Creditors want to see that the organization can repay money it borrows. The board of directors wants to see that the organization’s leaders are managing their resources. The Statement of Activities and Changes in Net Assets shares information regarding the organization’s revenues, expenses and net assets.

Calculate support, revenues and gains. Support represents money contributed from donors. Revenues refer to money earned through organization functions, such as selling items or services. The organization recognizes gains when it sells investments it made for more than it paid. Review the financial account balances listed in the trial balance and identify each support, revenue or gain account. Add these balances together.

Calculate expenses and losses. Expenses refer to the cost incurred to manage and operate the organization. The organization recognizes losses when it sells investments it made for less than it paid. Review the financial account balances listed in the trial balance and identify each expense or loss account. Add these balances together.

Subtract the total expenses and losses from the total support, revenues and gains. This calculates the total change in net assets. If the support, revenues and gains exceed the expenses and losses, the change represents an increase in net assets. If the expenses and losses exceed the support, revenues and gains, the change represents a decrease in net assets.

Add the total change in net assets to the beginning net asset balance. Locate the beginning net asset balance by reviewing the Statement of Financial Position from the prior year. This calculation results in the ending net asset balance.