The Ultimate Guide to Nonprofit Chart of Accounts with a Free Template

Tracking every dollar is crucial for nonprofits to operate effectively. Your organization needs a simple yet strong way to monitor funds, meet donor requirements, and show exactly how funds support your mission. 

This is where a chart of accounts (COA) becomes your most valuable tool, offering a comprehensive overview of your organization's financial health. Think of it as your financial directory—a numbered list that sorts every transaction into clear categories, from donations received to program expenses.

In this guide, you'll learn everything about the nonprofit chart of accounts - from basic concepts to practical tips. We've also included examples and a ready-to-use template to help you create your own COA.

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Table of contents:

What is a nonprofit chart of accounts?

Purpose of a chart of accounts

4 essential elements of a chart of accounts

3 different types of nonprofit chart of accounts 

6 tips for maintaining your chart of accounts

Sample nonprofit chart of accounts template [Downloadable]

Final thoughts on the nonprofit chart of accounts

FAQs on nonprofit chart of accounts

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What is a nonprofit chart of accounts?

A chart of accounts is a list of all your organization's accounts, organized to track every dollar that comes in and goes out. It offers a clear structure to record and sort all financial activities: donations, expenses, and fees.

While each nonprofit can structure its COA differently, it should be designed to track both unrestricted funds and those with donor restrictions, making it easier to create reports and manage accounting.

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Purpose of a chart of accounts (COA)

• Financial organization: A chart of accounts serves as the foundation for effective financial oversight by organizing all transactions into clear, structured categories.
• Effective budgeting: A detailed chart of accounts helps you set realistic program budgets and predict cash flow needs based on historical patterns.
• Informed decision-making: By offering detailed financial insight, a COA ensures you can make informed decisions about where to make more investments and maximize your mission's impact.
• Regulatory compliance: Your chart of accounts helps you track tax-deductible donations, unrelated business income, and program expenses separately, making tax filing and financial reporting more accurate.
• Fund and grant management: A COA helps track restricted and unrestricted funds separately, ensuring that funds are spent according to donor or grantor requirements.
• Simplified audit process: An organized COA makes it easier for auditors to review financial data and ensure compliance during an audit.

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4 essential elements of a chart of accounts

1. Account number 

Each account is assigned a unique numerical code for easy identification and sorting. While all COAs use similar numbering to avoid confusion, organizations can choose their own system.

Most organizations follow GAAP (Generally Accepted Accounting Principles) numbering conventions as it makes your financial statements easier for auditors and donors to understand. GAAP typically uses the following numbering range:

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2. Name 

Each account needs a clear, descriptive name that explains its purpose at a glance.

For example, instead of a generic name like "income," you might use specific names like "individual donations," "corporate sponsorships," or "program service fees." These detailed names help everyone in your organization understand what belongs in each account.

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3. Type or category 

Most charts of accounts will break into the following categories:

• Assets: Everything your nonprofit owns, including cash in bank accounts, funds owed to you (accounts receivable), inventory, and physical items like equipment and furniture
• Liabilities: What your nonprofit owes to others, such as loans, mortgages, and employee paid time off (PTO)
• Equity or net assets: Includes funds that are divided into categories like unrestricted funds (which can be used for any purpose), temporarily restricted funds, permanently restricted funds, and endowments.
• Revenue: All funds your nonprofit receives
• Expenses: All funds your nonprofit spends

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4. Description

Each account needs a clear explanation of its purpose and what it records. This description helps both your team members and external stakeholders, like funders, understand the flow of funds in your organization.

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3 different types of nonprofit chart of accounts 

1. Unified Chart of Accounts 

The Unified Chart of Accounts (UCOA) is a common accounting framework in the US that organizes financial information using a structured list of account codes. It aligns with Form 990 reporting requirements, making tax filing more straightforward. 

UCOA streamlines financial reporting, budgeting, and performance analysis across organizations. This chart type ensures compliance with accounting standards and makes financial statement preparation more efficient.

While this system helps with consistent reporting, its detailed structure may be too complex for small to mid-sized nonprofits, which can benefit from simpler templates.

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2. Operating chart of accounts 

An operating chart of accounts helps nonprofits manage their daily financial activities. It focuses on regular transactions like tracking income from programs and grants and expenses for staff salaries, office supplies, and utilities. 

While this chart primarily deals with day-to-day finances, it may include loans or equipment purchases directly affecting operations. 

This kind of COA helps nonprofits monitor their program costs, stay within budget, and make informed decisions about resource allocation.

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3. Group chart of accounts 

A group chart of accounts helps nonprofits with multiple locations or divisions manage their finances under one system. Think of it as a master chart (parent) that sets the main structure, while each location or program can have its own sub-chart (child) for specific needs. 

For example, if a nonprofit runs food banks in different cities, each location can track its unique expenses while following the main organization's account structure.

This chart offers two key benefits. First, it maintains consistency in how financial information is recorded across the organization. Second, it simplifies combining financial reports from all locations to see the complete picture of the organization's finances.

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6 tips for maintaining your chart of accounts

1. Use main and sub-accounts strategically

A well-organized chart of accounts needs both main accounts and sub-accounts. The main accounts cover broad financial categories, while sub-accounts track specific items within those categories.

For example, under the main account "program expenses," you can create sub-accounts such as program supplies, staff travel costs, training materials, event space rental, and program equipment. This structure helps separate general costs from specific expenses, making it easier to track spending for each program component. 

When creating these accounts, focus on what financial information you need for reports, budgets, and grant requirements.

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2. Keep it simple and organized

Create only the essential categories needed for reporting and tracking, even when splitting funds across multiple accounts. Unnecessary complexity makes financial management harder, not easier.

For example, instead of having separate expense accounts for youth education programs, after-school tutoring, and more, you can combine them into a single youth education program account. 

Your chart of accounts should be detailed enough to show your organization's financial activities accurately but not so complex that it becomes difficult to use.

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3. Design with flexibility 

The chart of accounts must be flexible to adapt as your nonprofit grows. For instance, while your initial funding might come from grants and individual donations,  your COA should be able to accommodate additional categories, such as corporate partnerships and investments, as your revenue sources expand. 

A flexible chart of accounts ensures you can accurately track your organization's changing financial position. Before creating a new account, check if the activity fits an existing category.

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4. Use clear account names 

Name each account with specific, descriptive titles that anyone in your organization can understand. 

For example, instead of labeling an account as "miscellaneous program costs" or "other community expenses," use specific names like "youth mentorship program supplies" or "community workshop materials." 

Clear naming helps your team find the right accounts quickly and prevents confusion in financial recording. Always use the same naming style across similar accounts to maintain consistency.

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5. Use nonprofit accounting software 

While you can start with a spreadsheet, nonprofit accounting software makes managing your chart of accounts easier. Programs like QuickBooks or Sage Intacct help you organize and update your accounts and let you handle all financial tasks in one place - from recording transactions to creating reports. 

Look for software that includes features designed for nonprofits, like fund accounting, grant management, donation tracking, and more.

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6. Seek professional help 

Get help from accountants, bookkeepers, or nonprofit financial specialists when setting up or updating your chart of accounts. These professionals understand nonprofit accounting rules and can help structure your accounts to meet reporting requirements. 

They can also review your chart of accounts periodically to ensure it continues to serve your organization's needs and follows current accounting practices.

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Sample nonprofit chart of accounts template [Downloadable]

You can get started with this basic nonprofit chart of accounts template[Coming Soon]. Adjust the categories and accounts based on your organization's needs, programs, and reporting requirements.

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Final thoughts on a nonprofit chart of accounts

While setting up your chart of accounts might seem challenging at first, remember to keep it simple and adaptable to your organization's needs. With clear structure and regular updates, your COA will continue to be useful for all accounting reports and activities. 

Whether you choose a standard framework or create your own, the key is to ensure it works for your organization's current needs while being flexible enough to grow with you.

Make your financial management even more effective by pairing your chart of accounts with Zeffy's 100% free fundraising platform. With us, you can track donations, membership fees, and other contributions without any costs.

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FAQs on nonprofit chart of accounts