A plain-English walkthrough for business owners, nonprofit board members and executive directors, and HOA boards. Tap any line on the sample statements to see what it means and what to watch for.
The statements change names and focus depending on the organization.
Businesses usually get three statements: the balance sheet (what you own and owe), the income statement (whether you made money), and the statement of cash flows (where cash actually went).
Money in the bank on the statement date.
The key lines, ratios and red flags for all three statements on one printable page. Keep it next to your next board packet.
Enter a few numbers from your own statements. Nothing is sent anywhere; the math runs in your browser.
Rules of thumb only. Healthy ranges vary by industry, season and organization size.
The report on the first page of your statements tells you how much a CPA checked them.
| Compilation | Review | Audit | |
|---|---|---|---|
| What the CPA does | Puts your numbers into proper financial statement form | Analytics and inquiry of management | Tests transactions, confirms balances, evaluates controls |
| Assurance | None | Limited ("not aware of" material changes needed) | Reasonable (an opinion that statements are fairly presented) |
| Who usually needs it | Small businesses, small HOAs, internal use | Mid-size nonprofits and HOAs, some lenders | Larger nonprofits, federal awards, larger HOAs, investors and banks |
| Relative cost | $ | $$ | $$$ |
You don't need to be an accountant to ask good questions.
Every big variance should have an explanation you can repeat to someone else.
Use unrestricted cash for nonprofits and operating cash for associations.
Old balances are often uncollectible and overstate assets.
Reconciliations reviewed by someone other than the preparer are a basic control.
Pending lawsuits, grant changes, major repairs, loan covenants or tax notices.
Profit counts revenue when earned and expenses when incurred. Cash counts money when it moves. Growing receivables, inventory or loan payments can leave a profitable organization short on cash.
Most statements use accrual accounting, which records what was earned and owed, not just what cleared the bank. The cash flow statement connects the two.
The notes explain accounting policies, debt terms, restrictions, leases, related parties and subsequent events. Problems often show up in the notes before the numbers.
Management and the board, even when a CPA audits or reviews them. The CPA's report covers the CPA's work, not ownership of the numbers.
Download the Financial Statements Cheat Sheet (PDF).
Greywood CPA prepares audits, reviews, compilations and monthly bookkeeping for businesses, nonprofits and associations, with fixed, transparent pricing.
Talk to a CPAThis guide is general information and not accounting, tax or legal advice. Sample figures are illustrative. Talk to your CPA about your organization's statements.