2. Non For profit

Question 1

Unless explicitly restricted by donor or law, any investment earnings are unrestricted and can be used for the organization’s general operations. Reported in the statement of activities in net asset in “without donor resection.”

Question 2

Revenues and expenses from an annual fundraising campaign should NOT be netted together for non for profit entitie’s statement of activities. The purpose is to demonstrate how the NPO obtained resources and how they were used in providing its program and services. The statement reports revenues, net asset released from restriction and expenses.
Revenues and expenses reported at their gross amounts.
Secondary activities and peripheral information may be reported at net.

Question 3

An unconditional pledge is a promise to provide resources to a not for profit organization. The amount promised is accrued in AR and recorded as revenue. Unconditional please to be received/paid during each year for next four years is “revenue with donor restrictions.”
Use present value factor if provided in question!!!

Question 4

The endowment of not for profit organization have to come from an external party, board restriction doesn’t count.

Question 5

Although a not for profit organization does not have equity interest or earn a profit for shareholders, it still must report net assets ( assets minus liabilities) on its FS.
Unrealized holdings gain/losses from fair value changes of marketable equity securities will also increase the change in net assets.

Question 6

If donor specifies that a transferred asset must go to a specific entity ie. beneficiary, the NPO is merely an agent and will recognize a liability. If NPO can referent the funds received to other entities without donor’s consent, the NPO has variance power, will record revenue.

Question 7

Gift in kind donated to a not for profit organization are recognized at their FV on the date received. In each reporting period the items donated will be marked up or down to their FV as of the reporting date.

Question 8

NPO must recognize revenue from contributed services requiring specialized skills that are provided by individuals with this specialized skills, otherwise not recorded.

Question 9

Changes in net assets are categorized as with or without donor imposed restrictions.
Expenditure of restricted resources must first be reclassified from net asset with restriction to net asset without restrictions before recording an expense.
NPO’s expenses will decrease net assets without donor restrictions.

Question 10

The primary purpose of a not for profit organization’s statement of activities (IS equivalent) is to demonstrate how the organization’s resources are used in providing its programs and services.

Important:
The inflows of resources reported on the statement of activities refer to revenue, gains and net assets released from restrictions; the outflows of resources refer to expenses and losses. The difference between these categories is referred as “the change in net assets.”
The primary purpose of the statement of activities of a nonprofit is to report the change in net assets for the period. Not the one as of a specific date.

Question 11

Not for profit Financing Activities
1. donor restricted contributions for long-term purposes
2. Other financials activities
- proceeds from debt
- payments of debt