How to Calculate Net Assets in a Statement of Activities and Changes in Net Assets

By Motley Fool Staff – Updated Apr 29, 2025 at 10:52PM

Key Points

Charities blend nonprofit missions with for-profit strategies for clarity in financial reporting.
Understanding the statement of activities helps track net assets in charities.
Calculate a charity's net assets by adjusting the starting balance with period's gains or losses.
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Charities and other nonprofit organizations are known best for the charitable causes they serve, but increasingly, they are using strategies and techniques borrowed from the for-profit business world. It has become extremely important for charities to account for their assets and income in a way that their stakeholders can understand, and what's known as the statement of activities and changes in net assets provides vital financial information. Below, you'll learn more about this statement and how you can use it to calculate the net assets that a nonprofit holds.

The word Charity with a hand and red ribbon under a magnifying glass.

Image source: Getty Images.

How a charity works

The typical charity sees money flow through its organization in a regular way. Money comes in through charitable gifts from donors, and some charities offer goods or services that generate income, as well. It then flows out of the charity through ordinary expenses in the course of fulfilling the organization's mission.

In addition to the impact of cash flow on a charity's financial condition, changes in net assets can also happen because of increases or decreases in the value of those assets. When a charity sells an asset, it can realize a gain or loss compared to what it paid, and that can affect the net value of the charity's total assets. For publicly traded securities, changes in value also occur from simple market fluctuations, and those increases or decreases will be reflected in the unrealized gain or loss on the charity's portfolio.

All of these figures should appear on a charity's statement of activities and changes in net assets. Therefore, if you have that statement, as well as the amount of net assets as of the beginning date that the statement covers, then you can easily calculate the ending net asset amount.

Calculating net assets

In order to calculate net assets as of the end of the accounting period, follow these steps.

Add up all the inflows from donations and revenue that the charity generated.
Subtract the outflows from expenses related to the charity's operations.
Find the net realized gain or loss from sales of assets during the period, and either add in the gain or subtract the loss.
Find the net unrealized gain or loss from changes in value of assets during the period, and either add in the gain or subtract the loss.

The result will give you the change in assets during the period. If it's positive, then add it to the beginning asset balance. If it's negative, subtract it from the beginning asset balance. That gives you the ending balance of net assets for the charity.