QuickBooks Online for Nonprofits: Funds, Classes and Restricted Net Assets, Set Up the Way Your Auditor Expects

Written & reviewed by Ram Singh, founder, Numerawise Solutions · Last reviewed October 5, 2026

QuickBooks Online can keep a nonprofit’s books the way an auditor expects, but only if three things are set up on purpose. You need QuickBooks Online Plus or Advanced, because Simple Start and Essentials have no class tracking. Set the company type to nonprofit so the reports use nonprofit names. And build net assets with and without donor restrictions as accounts yourself, because classes alone will not produce them. Sources: Intuit help articles on configuring QuickBooks Online for a nonprofit, tracking donations, fund accounting and usage limits (each updated August 2026); FASB Accounting Standards Update 2016-14; all read 5 October 2026.

Step 1: pick the plan by counting funds and programs

Intuit’s usage-limits article (updated 8/5/2026) sets the caps that matter for a nonprofit:

Intuit’s fund-accounting article applies only to Plus, Advanced and Intuit Enterprise Suite. Add up your restricted funds, programs and grant-funded projects. If the total, plus any locations you use, stays under 40, Plus works. If you are near 40 or expect to grow past it, budget for Advanced.

Step 2: switch the company type to nonprofit

Go to Settings › Account and settings › Advanced › Company type and set the tax form to Nonprofit organization (Form 990). Intuit says invoices then become pledges, and the reports become a Statement of Activity and a Statement of Financial Position. Under Other preferences, change the customer label to Donors. Some screens keep the old words. The Profit and Loss tile stays, and the drop-down menus still say Invoice and Sales receipt. Only the form name in Custom form styles can be renamed.

To record gifts, Intuit’s donations article uses a revenue account with the detail type Non-Profit Income and a non-inventory item such as “Fund donations.” Record a promise as a pledge and receive payment later. Record cash in hand as a sales receipt or a bank deposit.

Step 3: classes vs locations vs sub-accounts — decide what tracks funds

This is the decision most nonprofit files get wrong. QuickBooks gives you three ways to tag a transaction, and each one answers a different question:

Small organizations with a few programs and few restricted gifts can use one class per fund, which is the approach in Intuit’s article, and run Profit and Loss by Class. Once you need both program reporting and grant reporting, use classes for function and program and locations for funds. Then every expense carries both answers. Keep in mind that QuickBooks reports on funds but does not stop spending once a fund is used up. Intuit’s article describes that control as part of fund accounting in general, not as something QuickBooks enforces.

Step 4: build net assets the way your financial statements show them

FASB’s ASU 2016-14 requires a not-for-profit to present two classes on its statement of financial position: net assets without donor restrictions and net assets with donor restrictions. QuickBooks Online will not create these from classes, so build them in the chart of accounts:

1. Rename the Retained Earnings account to Net assets without donor restrictions. QuickBooks closes the year’s net income into it automatically.
2. Add an equity account, Net assets with donor restrictions.
3. Split revenue into Contributions – without donor restrictions and Contributions – with donor restrictions.
4. Add two income accounts for Net assets released from restriction, one under each class of revenue, so that the release nets to zero.

Worked example. A foundation gives $50,000 restricted to an after-school program. You record it to Contributions – with donor restrictions, tagged to that program’s fund. During the year you spend $12,000 on the program. The expenses post normally. Then one journal entry releases $12,000: a debit to the release account under with-restrictions and a credit to the release account under without-restrictions. At year end, a closing entry moves the remaining $38,000 of restricted activity from net assets without donor restrictions into net assets with donor restrictions. The Statement of Financial Position then shows $38,000 still restricted, which is the number the auditor will tie to the grant letter.

Step 5: functional expenses

ASU 2016-14 also requires an analysis of expenses by both function and nature. Function means program services and supporting activities; nature means salaries, rent, supplies and so on. We did not find a statement of functional expenses report in Intuit’s nonprofit help articles. The practical route is to tag every expense with a function class, run Profit and Loss by Class, and export it to a spreadsheet. Shared costs such as rent and the executive director’s salary need an allocation basis, for example time records or square footage, that you write down once and apply every month.

What the auditor will ask for at year end

• A list of restricted gifts, each with its donor letter, the amount spent, the amount released and the remaining balance.
• A reconciliation from your pledge balances to the open pledges in QuickBooks.
• The written basis for allocating shared costs, and a functional expense schedule that ties to total expenses.
• A closed period. Set a closing date and password so prior-year numbers cannot change after the audit.

If the file already mixes funds, uses one income account for everything, or has three years of unreconciled releases, fix that before the audit, not during it. We start that kind of cleanup by reviewing the file. The bookkeeping page covers what monthly upkeep looks like afterward.

Frequently asked questions

Which QuickBooks Online plan does a nonprofit need?

Plus at minimum, if you track funds or programs, because Simple Start and Essentials have no class tracking. Plus allows 40 classes and locations combined and 5 billable users. Advanced removes the class and location cap and allows 25 users.

Does QuickBooks Online have nonprofit reports?

Yes. Once the company type is set to Nonprofit organization (Form 990), the reports include a Statement of Activity and a Statement of Financial Position, and invoices are called pledges. We did not find a built-in statement of functional expenses, so most nonprofits build it from Profit and Loss by Class.

Can classes alone track restricted funds?

Classes show income and spending by fund, but they do not create the two net asset classes that a not-for-profit balance sheet must present under ASU 2016-14. Add equity accounts for net assets with and without donor restrictions, and post release entries when restricted money is spent.

Does QuickBooks stop spending when a fund runs out?

No. Intuit's fund-accounting article describes blocking spending from an empty fund as a feature of fund accounting in general. QuickBooks Online reports fund balances but does not enforce the limit, so someone has to check the fund before approving the expense.

Coming from dedicated fund-accounting software? Cougar Mountain to QuickBooks Online explains how funds map to classes and what carries over. We give a fixed quote after we review your file. We are not a CPA firm or tax adviser: have your auditor or CPA confirm your net-asset presentation and Form 990 reporting.