Nonprofit chart of accounts in QuickBooks

Why a business chart breaks a nonprofit’s books

A chart of accounts for a nonprofit has to answer two questions a business chart never asks: whose money is this, and which line of Form 990 does this cost belong on. The default QuickBooks Online chart answers neither. It has an Owner’s Equity account for an organization with no owners, a single Sales account for gifts, grants, and event tickets, and expense names that do not line up with the IRS form the organization files every year.

The usual result shows up at year-end. A $50,000 foundation grant for one program sits in general income, gets spent on rent, and nobody can say whether the restriction was honored. The tax preparer then rebuilds the expense side by hand, line by line, from a Profit and Loss that was sorted by vendor.

The chart below fixes both problems in the account structure itself, so the Statement of Activity and the Form 990 handoff come out of QuickBooks instead of a spreadsheet. Download it ready to import:

Switch QuickBooks Online to nonprofit mode first

Before importing anything, tell QuickBooks it is keeping books for a nonprofit. Go to Settings, then Account and settings, then Advanced. In Company type, select Edit, set Tax form to Nonprofit organization (Form 990), and save. Sign out and back in.

QuickBooks then relabels its forms (an invoice becomes a Pledge) and adds the Statement of Activity and Statement of Financial Position reports. Under Other preferences on the same Advanced tab, change the Customer label to Donors. Some labels, such as the Profit and Loss tile, do not change, according to Intuit’s own setup article.

Then turn on Track classes under Categories. Class tracking is only on QuickBooks Online Plus and Advanced, and a nonprofit needs it for the reason explained below.

How the numbering works

The chart uses a four-digit block for each section, which keeps a nonprofit’s accounts in the order the financial statements read:

Block	Section	What lives there
1000s	Assets	Bank accounts, pledges and grants receivable, fixed assets
2000s	Liabilities	Payables, accrued payroll, refundable advances
3000s	Net assets	Without donor restrictions, with donor restrictions
4000s	Support and revenue	Contributions, grants, in-kind, events, fees, releases
6000s	Expenses by nature	One account per Form 990 Part IX line the organization uses
7000s	Other income	Interest and investment income
8000s	Other expense	Depreciation

There is no 5000 block. Most nonprofits sell nothing, so they have no Cost of Goods Sold, and leaving the gap means a gift shop or a thrift store can add one later without renumbering.

The four accounts a business chart does not have

Account 3100: Net Assets With Donor Restrictions

FASB’s ASU 2016-14 replaced the old three classes (unrestricted, temporarily restricted, permanently restricted) with two: net assets without donor restrictions and net assets with donor restrictions. A gift belongs in the second class when the donor limited it to a purpose, such as one program, or to a time period, such as next year.

QuickBooks Online closes all net income to a single equity account at year-end, so the restricted balance does not land in Account 3100 on its own. Account 3000 is the renamed Retained Earnings account, and a year-end journal entry moves the restricted portion across (worked below). QuickBooks has no net asset detail type, so 3100 uses Owner’s Equity as its detail type. The account name is what the reports show.

Account 4040 and Account 4900: restricted gifts and their release

Record every restricted gift to Account 4040, Contributions With Donor Restrictions, never to general contributions. When the organization spends the money on what the donor asked for, the restriction is released. The release is a journal entry that debits 4040 and credits Account 4900, Net Assets Released From Restrictions.

Total income does not change. What changes is the split: 4040 now shows only the restricted money still unspent, and 4900 shows how much restricted money became available to spend this year. That split is the release line a Statement of Activities is required to show.

Account 2200: Refundable Advances (Conditional Grants)

Under ASU 2018-08, a grant is conditional when the agreement has both a barrier the organization must clear (a matching requirement, a number of people served, an allowable cost incurred) and a right for the funder to take the money back if it does not. Cash received on a conditional grant is not revenue yet. It is a liability in Account 2200 until the condition is met. Many cost-reimbursement government grants work this way.

Account 4050: In-Kind Contributions

Donated office space, equipment, and professional services have a fair value, and ASU 2020-07 requires them to appear on their own line of the Statement of Activities, apart from cash gifts. Recording only the cash understates both revenue and what programs actually cost. Volunteer time is not recorded unless the service creates or improves a nonfinancial asset or needs a specialized skill the organization would otherwise pay for, such as an accountant or an electrician.

Expenses by nature, function by class

Form 990 Part IX, the Statement of Functional Expenses, asks for every expense twice: by nature (salaries, occupancy, travel) down the side, and by function across the top. The functions are column (B) program services, column (C) management and general, and column (D) fundraising. Section 501(c)(3) and 501(c)(4) organizations must complete all four columns; other exempt organizations complete column (A), the total, only.

The chart handles nature with accounts and function with classes. Each 6000-series account maps to one Part IX line:

Account	Form 990 Part IX line
6010 Grants & Assistance to Individuals	Line 2
6100 Salaries & Wages	Lines 5 and 7
6110 Employee Benefits	Line 9
6120 Payroll Taxes	Line 10
6210 Legal Fees	Line 11b
6200 Accounting & Audit Fees	Line 11c
6220 Professional Fundraising Fees	Line 11e
6300 Advertising & Promotion	Line 12
6400 Office Expenses	Line 13
6410 Information Technology	Line 14
6500 Occupancy	Line 16
6600 Travel	Line 17
6610 Conferences & Meetings	Line 19
8010 Depreciation	Line 22
6800 Insurance	Line 23
6900 Bank & Merchant Fees	Line 24, other

Set up three top-level classes: Program Services, Management and General, and Fundraising. Give each program its own sub-class under Program Services. Every expense line then carries one class, and Profit and Loss by Class produces the columns of Part IX directly. Shared costs, such as rent for one office, get split across classes by a documented method like square footage or staff time.

Smaller organizations file a shorter return. The IRS allows Form 990-EZ when gross receipts are under $200,000 and total assets are under $500,000, and the 990-N e-Postcard when gross receipts are normally $50,000 or less. The chart works for all three; the smaller returns simply ask for less of it.

Complete nonprofit chart of accounts

The full 38-account chart, in the order QuickBooks imports it:

Number	Account name	Account type	Detail type
1010	Operating Checking	Bank	Checking
1020	Restricted Funds Savings	Bank	Savings
1100	Pledges Receivable	Accounts Receivable (A/R)	Accounts Receivable (A/R)
1150	Grants Receivable	Other Current Assets	Other Current Assets
1300	Prepaid Expenses	Other Current Assets	Prepaid Expenses
1500	Furniture & Equipment	Fixed Assets	Furniture & Fixtures
1510	Accumulated Depreciation	Fixed Assets	Accumulated Depreciation
2000	Accounts Payable	Accounts Payable (A/P)	Accounts Payable (A/P)
2100	Accrued Payroll	Other Current Liabilities	Other Current Liabilities
2200	Refundable Advances (Conditional Grants)	Other Current Liabilities	Other Current Liabilities
3000	Net Assets Without Donor Restrictions	Equity	Retained Earnings
3100	Net Assets With Donor Restrictions	Equity	Owner’s Equity
4010	Individual Contributions	Income	Non-Profit Income
4020	Foundation & Corporate Grants	Income	Non-Profit Income
4030	Government Grants	Income	Non-Profit Income
4040	Contributions With Donor Restrictions	Income	Non-Profit Income
4050	In-Kind Contributions	Income	Non-Profit Income
4060	Special Event Revenue	Income	Other Primary Income
4070	Program Service Fees	Income	Service/Fee Income
4080	Membership Dues	Income	Service/Fee Income
4900	Net Assets Released From Restrictions	Income	Non-Profit Income
6010	Grants & Assistance to Individuals	Expenses	Charitable Contributions
6100	Salaries & Wages	Expenses	Payroll Expenses
6110	Employee Benefits	Expenses	Payroll Expenses
6120	Payroll Taxes	Expenses	Payroll Expenses
6200	Accounting & Audit Fees	Expenses	Legal & Professional Fees
6210	Legal Fees	Expenses	Legal & Professional Fees
6220	Professional Fundraising Fees	Expenses	Legal & Professional Fees
6300	Advertising & Promotion	Expenses	Advertising/Promotional
6400	Office Expenses	Expenses	Office/General Administrative Expenses
6410	Information Technology	Expenses	Office/General Administrative Expenses
6500	Occupancy	Expenses	Rent or Lease of Buildings
6600	Travel	Expenses	Travel
6610	Conferences & Meetings	Expenses	Other Business Expenses
6800	Insurance	Expenses	Insurance
6900	Bank & Merchant Fees	Expenses	Bank Charges
7010	Interest & Investment Income	Other Income	Interest Earned
8010	Depreciation	Other Expense	Depreciation

You can search and filter this structure in the interactive nonprofit chart of accounts explorer. Charts for other industries: construction, restaurants, law firms, real estate, and trucking.

Worked entries for a restricted grant, in-kind rent, and a conditional grant

The general mechanics of debits and credits are in our journal entry examples. These four entries are the ones that make a nonprofit chart different.

Entry 1: a restricted foundation grant arrives

On March 3, a foundation pays a $50,000 grant restricted to the youth literacy program. The money goes to the restricted savings account:

Date	Account	Debit	Credit
Mar 3	1020 Restricted Funds Savings	50,000.00
Mar 3	4040 Contributions With Donor Restrictions		50,000.00

Entry 2: releasing the restriction as the program spends it

By December 31, the literacy program has spent $30,000 on salaries and books, all recorded to 6000-series accounts with the program’s class. Release that amount from restriction:

Date	Account	Debit	Credit
Dec 31	4040 Contributions With Donor Restrictions	30,000.00
Dec 31	4900 Net Assets Released From Restrictions		30,000.00

Post releases monthly if the board reviews monthly statements, so restricted income never looks spendable before it is.

Entry 3: donated office space

A local business lets the organization use an office it would otherwise rent for $1,200 a month. Record the fair value each month as both a gift and a cost:

Date	Account	Debit	Credit
Apr 30	6500 Occupancy	1,200.00
Apr 30	4050 In-Kind Contributions		1,200.00

No cash moves, so nothing in this entry touches a bank account.

Entry 4: a conditional grant, before and after the condition

On April 1, a county pays a $10,000 advance on a grant that is only earned as the organization spends money on eligible meals, and any unspent balance goes back. The advance is a liability:

Date	Account	Debit	Credit
Apr 1	1010 Operating Checking	10,000.00
Apr 1	2200 Refundable Advances (Conditional Grants)		10,000.00

When the eligible costs are incurred, the condition is met. Debit Account 2200 and credit Account 4030 Government Grants for the amount earned, $10,000 once the full advance is spent.

The year-end entry QuickBooks will not make for you

At year-end, Account 4040 holds $20,000: the $50,000 grant less the $30,000 released. That $20,000 is the year’s increase in net assets with donor restrictions. QuickBooks closes the whole year’s net income into Account 3000, so move the restricted part across, dated the last day of the fiscal year:

Date	Account	Debit	Credit
Dec 31	3000 Net Assets Without Donor Restrictions	20,000.00
Dec 31	3100 Net Assets With Donor Restrictions		20,000.00

Next year, when the program spends the last $20,000, the release makes 4040 negative for that year, and the year-end entry runs the other way: debit 3100 and credit 3000. The rule is the same every year: move 4040’s year-end balance between the two net asset accounts.

Gift acknowledgments the books have to support

Two IRS rules turn the donor list into a compliance record. A donor cannot deduct a single contribution of $250 or more without a written acknowledgment from the organization (IRC §170(f)(8)). And when a donor pays more than $75 and gets something back, such as a gala dinner, the organization must give a written statement of the deductible amount (IRC §6115), with a penalty for failing to. Recording event tickets to Account 4060 Special Event Revenue, apart from straight gifts, makes both lists easy to pull.

How to import the chart into QuickBooks Online

1. Download nonprofits-chart-of-accounts-quickbooks.csv.
2. Under Account and settings, Advanced, turn on account numbers.
3. From the Gear icon, open Import data and choose Chart of accounts.
4. Upload the file and map the four columns: Account Number, Account Name, Type, and Detail Type.
5. Review the preview and select Import.
6. QuickBooks keeps its own Retained Earnings account. Rename it Net Assets Without Donor Restrictions, then merge any duplicate the import created into it.

When the history needs rebuilding

A new chart sorts every transaction from today forward. It does nothing for three years of restricted grants booked to general income, in-kind rent that was never recorded, or a Form 990 built from a spreadsheet nobody can tie back to QuickBooks. Restating those years means walking back through each grant agreement and re-booking it, which is QuickBooks cleanup work priced per month of history:

$99per month of backlog20% off 6+ months

If you are not sure how far back the restricted balances stop making sense, send the file for a free review. Once the books are current, monthly bookkeeping keeps releases posted and classes complete each month, and the year-end handoff pack covers what the return preparer will ask for.