While a traditional commercial organization has little to no trouble determining what is revenue on its statement of activities, nonprofits often find this to be a challenge. Generally speaking, a nonprofit isn’t receiving payment for services rendered. Instead, contributions, promised contributions, and exchanges of goods or services make up the bulk of revenue.
The problem with nonprofit accounting is that it relies on a firm understanding of what counts as revenue and for how much. It may be clear with unrestricted contributions, where the money has already been received. However, promised contributions that have strings attached and transactions conditioned upon the occurrence of future events can be more difficult to decipher.