The following is a glossary of nonprofit accounting terminology.

Agent. An entity acting for and on behalf of a principal, which may be either a resource provider or a beneficiary.

Annuity gift. A transfer of assets to a not-for-profit organization in connection with a split-interest agreement that is in part a contribution and in part an exchange transaction. The organization accepts the contribution and is obligated to make periodic stipulated payments to the donor or a third-party beneficiary for a specified period of time, usually either a specified number of years or until the death of the donor or third-party beneficiary.
Annuity trust. See charitable remainder trust.

Board designated. See designated net assets and endowment fund.
Charitable lead trust. A trust established in connection with a split-interest agreement, in which the not-for-profit organization receives distributions during the agreement's term. Upon termination of the trust, the remainder of the trust assets is paid to the donor or to third-party beneficiaries designated by the donor.

Charitable remainder trust. A trust established in connection with a split-interest agreement, in which the donor or a third party beneficiary receives specified distributions during the agreement's term. Upon termination of the trust, a not-for-profit organization receives the assets remaining in the trust.

Collections. Works of art, historical treasures, or similar assets that are (a) held for public exhibition, education, or research in furtherance of public service rather than for financial gain, (b) protected, kept unencumbered, cared for, and preserved, and (c) subject to an organizational policy that requires the proceeds of items that are sold to be used to acquire other items for collections.

Conditional promise to give. A promise to give that depends on the occurrence of a specified future and uncertain event to bind the promisor.

Contribution. An unconditional transfer of cash or other assets to an entity or a settlement or cancellation of its liabilities in a voluntary nonreciprocal transfer by another entity acting other than as an owner.

Corpus. The principal amount of a gift or trust. Usually refers to the portion of a split-interest gift or an endowment fund that must be maintained over a specified period or in perpetuity.

Designated net assets. Unrestricted net assets subject to self-imposed limits by action of the governing board. Designated net assets may be earmarked for future programs, investment, contingencies, purchase or construction of fixed assets, or other uses.

Donor-imposed condition. A donor stipulation that specifies a future and uncertain event whose occurrence or failure to occur give the promisor a right of return of the assets it has transferred or releases the promisor from its obligation to transfer its assets.

Donor-imposed restriction. A donor stipulation that specifies a use for the contributed asset that is more specific than broad limits resulting from the nature of the organization, the environment in which it operates, and the purposes specified in its articles of incorporation or bylaws, or comparable documents for an unincorporated association. A restriction on an organization's use of the asset contributed may be temporary or permanent.

Endowment fund. An established fund of cash, securities or other assets to provide income for the maintenance of a not-for-profit organization. The use of the assets of the fund may be permanently restricted, temporarily restricted or unrestricted. Endowment funds generally are established by donor-restricted gifts and bequests to provide a permanent endowment, which is to provide a permanent source of income, or a term endowment, which is to provide income for a specified period. The portion of a permanent endowment that must be maintained permanently -- not use up, expended, or otherwise exhausted -- is classified as permanently restricted net assets. The portion of a term endowment that must be maintained for a specified term is classified as temporarily restricted net assets. An organization's governing board may earmark a portion of its unrestricted net assets as a board-designated endowment (sometimes referred to as funds functioning as endowment or quasi-endowment funds) to be invested to provide income for a long but unspecified period. A board-designated endowment, which results from an internal designation, is not donor-restricted and is classified as unrestricted net assets.

Equity. See net assets.

Functional classification. A method of grouping expenses according to the purpose for which the costs are incurred. The primary functional classifications are program services and supporting activities.

Funds functioning as endowment. Unrestricted net assets earmarked by an organization's governing board, rather than restricted by a donor or other outside agency, to be invested to provide income for a long but unspecified period. A board-designated endowment, which results from an internal designation, is not donor-restricted and is classified as unrestricted net assets. The governing board has the right to decide at any time to expend the principal of such funds. (Sometimes referred to as quasi-endowment funds.) See also designated net assets.

Fund raising activities. Activities undertaken to induce potential donors to contribute money, securities, services, materials, facilities, other assets, or time. They include publicizing and conducting fund-raising campaigns; maintaining donor mailing lists; conducting special fund-raising events; preparing and distributing fund-raising manuals, instructions, and other materials; and conducting other activities involved with soliciting contributions from individuals, foundations, governments, and others.

Funds held in trust by others. Resources held and administered, at the direction of the resource provider, by an outside trustee for the benefit of the organization, frequently in connection with a split-interest agreement or permanent endowment.

Gift annuity. See annuity gift.

Life income agreement. A form of split-interest agreement. See annuity gift and charitable remainder trust.

Life tenant. One who possesses a life-use right to property, frequently used in connection with a split-interest agreement.

Natural expense classification. A method of grouping expenses according to the kinds of economic benefits received in incurring those expenses. Examples of natural expense classifications include salaries and wages, employee benefits, supplies, rent, and utilities.

Net assets. The excess or deficiency of assets over liabilities, classified according to the existence or absence of donor-imposed restrictions.

Net asset class(es). The classification of net assets based upon the existence or absence of donor-imposed restrictions. See also permanently restricted net assets, temporarily restricted net assets, and unrestricted net assets.

Net investment (equity) in land, buildings, and equipment. The total carrying value (after accumulated depreciation) of all property, plant, and equipment, less directly related liabilities. This amount is exclusive of real properties that are held for investment purposes.

Non-reciprocal transfer. A transaction in which an entity incurs a liability or transfers an asset to another entity (or receives an asset or cancellation of a liability) without directly receiving (or giving) value in exchange.

Not-for-profit organization. An entity that possesses the following characteristics that distinguish it from a business enterprise: (a) contributions of significant amounts of resources from resource providers who do not expect commensurate or proportionate pecuniary return, (b) operating purposes other than to provide goods or services at a profit, and (c) absence of ownership interests like those of business enterprises. Not-for-profit organizations have those characteristics in varying degrees ([FASB Statement of Financial Accounting] Concepts Statement No. 4, paragraph 6). Organizations that clearly fall outside this definition include all investor-owned enterprises and entities that provide dividends, lower costs, or other economic benefits directly and proportionately to their owners, members, or participants, such as mutual insurance companies, credit unions, farm and rural electric cooperatives, and employee benefit plans (FASB Concepts Statement No. 4, paragraph 7).

Permanent restriction. A donor-imposed restriction which stipulates that resources be maintained permanently but permits the organization to use up or expend part or all of the income (or other economic benefits) derived from the donated assets.

Permanently restricted net assets. The part of the net assets of a not-for-profit organization resulting from (a) contributions and other inflows of assets whose use by the organization is limited by donor-imposed stipulations that neither expire by passage of time nor can be fulfilled or otherwise removed by actions of the organization, (b) other asset enhancements and diminishments subject to the same kinds of stipulations, and (c) reclassifications from (or to) other classes of net assets as a consequence of donor-imposed stipulations.

Promise to give. A written or oral agreement to contribute cash or other assets to another entity. A promise to give may be either conditional or unconditional.

Program services. The activities that result in goods and services being distributed to beneficiaries, customers, or members that fulfill the purposes or mission for which the organization exists. Those services are the major purpose for and the major output of the organization and often relate to several major programs.

Quasi-endowment. See funds functioning as endowment.

Reclassifications. Transfers of amounts from one net asset class to another, usually as a result of the release or lapsing of restrictions.

Remainder trust. See charitable remainder trust.

Remainderman. The recipient of the corpus (remaining principal) of a trust upon termination.

Restricted support. Donor-restricted revenues or gains from contributions that increase either temporarily restricted net assets or permanently restricted net assets. See also unrestricted support.

Restricted net assets. Resources whose use is restricted by donors as contrasted with those over which the organization has complete control and discretion. Restricted net assets may be permanently or temporarily restricted.

Spending-rate. The portion of total return on investments used for fiscal needs of the current period, usually used as a budgetary method of reporting returns of investments. It is usually measured in terms of an amount or a specified percentage of a moving average market value. Typically, the selection of a spending rate emphasizes (a) the use of prudence and a systematic formula to determine the portion of cumulative investment return that can be used to support fiscal needs of the current period and (b) the protection of endowment gifts from a loss of purchasing power as a consideration in determining the formula to be used.

Split-interest agreement. Trust or other arrangements initiated by donors under which not-for-profit organizations receive benefits that are shared with either the donor or third party beneficiaries. These gifts include lead interests (see charitable lead trust) and remainder interests (see charitable remainder trust, annuity gift, and annuity trust).
Stipulation. A statement by a donor that creates a condition or restriction on the use of transferred resources.

Supporting activities. Activities other than program services. The primary supporting activities are management and general, fund raising, and membership development activities.

Temporary restriction. A donor-imposed restriction that permits the donee organization to use up or expend the donated assets as specified and is satisfied either by the passage of time or by actions of the organization.

Temporarily restricted net assets. The part of the net assets of a not-for-profit organization resulting from (a) contributions and other inflows of assets whose use by the organization is limited by donor-imposed stipulations that either expire by the passage of time or can be fulfilled and removed by actions of the organization pursuant to those stipulations, (b) other asset enhancements and diminishments subject to the same kinds of stipulations, and (c) reclassifications to (or from) other classes of net assets as a consequence of donor-imposed stipulations, their expiration by passage of time, or their fulfillment and removal by actions of the organization pursuant to those stipulations.

Term endowment. A donor-restricted contribution that must be maintained for a specified term.

Total return. A measure of investment performance that focuses on the overall return on investments, including interest and dividend income as well as realized and unrealized gains and losses on investments. Frequently used in connection with a spending-rate formula to determine how much of that return will be used for fiscal needs of the current period.

Unconditional promise to give. A promise to give that depends only on passage of time or demand by the promisee for performance.

Unrestricted net assets. The part of net assets of a not-for-profit organization that is neither permanently restricted nor temporarily restricted by donor-imposed stipulations.
Unrestricted support. Revenues or gains from contributions that are not restricted by donors. See also restricted support.

Voluntary health and welfare organizations. Organizations formed for the purpose of performing voluntary services for various segments of society. They are tax-exempt (organized for the benefit of the public), supported by the public, and operated on a "not-for profit" basis. Most voluntary health and welfare organizations concentrate their efforts and expend their resources in an attempt to solve health and welfare problems of our society and, in many cases, those of specific individuals. As a group, voluntary health and welfare organizations include those not-for-profit organizations that derive their revenue primarily from voluntary contributions from the general public to be used for general or specific purposes connected with health, welfare, or community services.