Chart of Accounts Best Practices for Nonprofits

Your chart of accounts is the list of every account in your general ledger, and a clear structure makes grant tracking and reporting easier. The guide below gives an example numbering scheme for a nonprofit, and it explains how to connect your accounts to each funder's budget categories.

Example nonprofit account structure

The numbers below are one common example. Your CPA may use a different scheme.

Assets (1000 to 1999)

• 1000: Cash and Cash Equivalents
• 1100: Accounts Receivable
• 1200: Grants Receivable
• 1300: Prepaid Expenses
• 1500: Fixed Assets

Liabilities (2000 to 2999)

• 2000: Accounts Payable
• 2100: Accrued Expenses
• 2200: Deferred Revenue
• 2300: Refundable Advances, for example a conditional contribution received before its conditions are met

Net assets (3000 to 3999)

• 3000: Without Donor Restrictions
• 3100: With Donor Restrictions, Time
• 3200: With Donor Restrictions, Purpose

Revenue (4000 to 4999)

• 4000: Contributions
• 4100: Grant Revenue
• 4200: Program Revenue
• 4300: Investment Income

Expenses (5000 to 7999)

• 5000: Personnel (Salaries and Benefits)
• 6000: Program Expenses
• 7000: Administrative Expenses

Natural expense accounts and funder categories

The table below shows an example of natural expense accounts, which group costs by what they are, such as salaries or travel. It isn't a standard funder template. Keep the general ledger useful for the whole organization, and keep a written crosswalk from your accounts to each award's budget categories.

Category	Account range	Examples
Personnel	5000 to 5199	Salaries, payroll taxes
Fringe	5200 to 5299	Health insurance, retirement, paid time off
Supplies	6000 to 6099	Office, program, computer
Equipment	6100 to 6199	Purchases, rentals, maintenance
Contractual	6200 to 6299	Consultants, subcontracts
Travel	6300 to 6399	Mileage, lodging, meals
Other direct	6400 to 6499	Training, communications
Indirect	7000 to 7099	Overhead, facilities and administrative costs

Matching accounts to grant budgets

In GrantLink, you set up budget lines separately for each grant on the grant's Budget page. The budget lines can match a funder's required categories, so you don't have to force one account-to-category map onto the whole organization. Allocations feed the grant's actuals, and GrantLink allocates eligible lines automatically when they match the grant's Expenses links in QuickBooks. You may still need to review which budget line an allocation belongs to, because an account doesn't always decide the funder category by itself.

Best practices

Use account numbers

To turn on account numbers in QuickBooks Online, go to Settings > Account and settings > Advanced, open the Chart of accounts section, and turn on Enable account numbers. Account numbers keep accounts in a consistent order, and they make accounts easier to pick and reports easier to read.

Use sub-accounts for detail

Sub-accounts let you add detail under a main account, as in this example.

5000 - Personnel
├── 5010 - Salaries - Program Staff
├── 5020 - Salaries - Admin Staff
└── 5030 - Salaries - Management

6300 - Travel
├── 6310 - Local Travel/Mileage
├── 6320 - Out of Town Travel
└── 6330 - Conference Travel

Handle restricted funds and multi-year awards carefully

Separate revenue accounts can help with internal reporting, for example for grants with matching or cost-share requirements. However, they don't replace a schedule of donor restrictions or correct net asset accounting.

Classify conditional contributions and exchange contracts under your organization's accounting policy. A multi-year award isn't deferred revenue only because it covers more than one year.

Keep the list manageable

Don't create accounts you won't use, and combine accounts for similar expenses. Make unused accounts inactive instead of deleting them. On QuickBooks Online Simple Start, Essentials, and Plus, the chart of accounts is limited to 250 active accounts, and Advanced has no limit.

Common mistakes to avoid

1. Too many accounts make reports harder to read and accounts harder to pick.
2. Inconsistent naming makes searches and reports harder to use.
3. Without account numbers, accounts sort by name within each account type, which may not match your reporting order.
4. A flat list with no sub-accounts hides detail you need in reports.
5. Adding a separate account for every funder category creates grant-specific accounts that are hard to use across the organization. Keep a reviewed crosswalk instead.

How GrantLink supports this today

GrantLink syncs QuickBooks Online transactions, including lines posted to expense accounts, so you can allocate and review them by grant. On each grant, you can compare allocations with the grant's budget lines, and you can view spending by account across grants.

After you add a grant, open its Details page and use the QuickBooks panel to choose the Classes, Customers, Projects, or Locations that identify the grant's costs on the Expenses tab. GrantLink allocates matching expense lines automatically, but budget-line coding and exceptions may still need review. Use the Money received tab to pick the records whose income belongs to the grant. The tab is labeled "Money received," but it matches income or revenue lines, so a matched line isn't always a cash receipt.

GrantLink doesn't require one tracking type for the whole organization. QuickBooks Online stays your accounting record, and your finance lead or CPA should review account classifications.

Sources

• Intuit: Add an account to your chart of accounts: QuickBooks Online account types, detail types, and account setup.
• Intuit: Learn about usage limits: chart of accounts limits by plan.
• FASB: ASU 2016-14: the two net asset classes and the analysis of expenses by nature and function.