Association accounting can be confusing if you’re used to standard for-profit business accounting. While not-for-profit associations share many similarities with businesses such as generating revenue, paying expenses, serving clients or members, and employing staff there are key differences in financial reporting, terminology, and compliance requirements that are important to understand in 2025.
1.Key Terminology Differences
The financial statements used in association accounting often have different names, even though they provide similar information to their business accounting counterparts.
| Business Accounting | Association Accounting |
| Balance Sheet | Statement of Financial Position |
| Income Statement | Statement of Changes in Net Assets |
| Retained Earnings | Net Assets – Restricted or Unrestricted |
| Net Income | Excess of Revenue Over Expenditures |
Understanding these terms is essential when reading or preparing an association’s financial reports.
2. Accounting for Contributions
Associations must track contributions separately from other revenue. This is because contributions (such as donations, grants, or sponsorships) often come with restrictions on how and when they can be used.
There are two primary methods for accounting for contributions:
a.The Deferral Method
- Restricted contributions for current expenses are recorded as revenue in the same period.
- Restricted contributions for future use are recorded as deferred contributions.
- When deferred funds are spent, they are recognized as revenue in that period
b. The Restricted Fund Method
- Uses fund accounting, where funds with donor or legal restrictions are tracked separately.
- Funds are classified as unrestricted, temporarily restricted, or permanently restricted.
- Each fund has its own set of accounts, revenue sources, and expenses.
- This method focuses on accountability over profitability and follows Accounting Standards Board (AcSB) guidelines.
In 2025, with increased donor expectations for transparency, fund accounting remains the best practice for many associations.
3. Registration Rules in Canada
In Canada, not-for-profit organizations fall into two main categories:
- Registered Charities – Can issue tax receipts for donations, allowing donors to claim charitable tax credits. They must register with the Canada Revenue Agency (CRA) and meet rules such as the disbursement quota for spending on charitable purposes.
- Non-Profit Organizations (NPOs) – Cannot issue charitable donation receipts. They may need to register with Corporations Canada or provincially, depending on their structure and activities.
4. Tax Filing Requirements (2025)
Both registered charities and NPOs must file with the CRA within six months of their year-end.
- Registered Charities: File Form T3010 (Registered Charity Information Return)
- Non-Profit Organizations: File Form T1044 (NPO Information Return)
- Incorporated NPOs: Must also file T2 Corporation Income Tax Return
Tax Considerations in 2025:
- Registered charities remain exempt from income tax.
- NPOs may owe tax on property income or capital gains.
- Both must comply with GST/HST requirements — see our blog: GST/HST: What Your Association or Registered Charity Needs to Know.
As an association management company and event management provider, we share this overview for informational purposes only. This article is general guidance and not a substitute for professional accounting or legal advice.
Be sure to check out these additional articles on association accounting best practices by Pamela via Strauss’ website: