F6 NFP Accounting and Governmental Accounting Flashcards
What is endowment?
An endowment is a gift to a nonprofit organization to be used for a specific purpose. The term endowment is also used to refer to the total investable assets of a nonprofit institution like a university.
What does in-kind contribution to NFP mean?
How they are recorded?
In-kind donations include any and all non-monetary donations to nonprofits or causes. They refer to the transfer of any assets, usually goods or services, to your organization from an individual, company, or other nonprofit.
In-kind contributions are recorded at fair market value.
Revenue sources of NFP’s
Contributions
Grants
Service Fees
Fundraising events
Investment income
Donor restrictions various proof
Donor letters
Grant agreements
Other communications
Report expenses for NFP entities.
There are three primary ways to report these expenses:
1.Statement of Activities
2.Notes to the financial statements
3.or in a separate Statement of Functional Expenses
Functional expenses
They are divided into three main categories:
1.Program services (expenses directly related to the mission of the NFP)
2.Management and general (administrative expenses)
3.Fundraising
NFP’s Cash Inflows from Operating Activities
-Contributions and Donations
-Membership Dues
-Service Revenue
-Fundraising Event Receipts
-Grant Income
-Interest income or dividend income from investments
NFP’s Cash Outflows from Operating Activities
-Salaries & Wages
-Operating Expenses
-Payment to Suppliers
-Professional Fees
-Insurance Premiums
-Program Expenses
-Fundraising Expenses
-Grants and Aid Disbursed
Primary emphasis in accounting and reporting for governmental funds
The measurement focus prescribed by GASB standards for all governmental funds is the “flow of current financial resources” focus which measures sources, uses, and balances of current financial resources.
Nongovernmental not-for-profit organizations are required following external financial statements?
-Statement of financial position
-Statement of activities
-Statement of cash flows
Measurement at fair value
Donated securities are recorded at fair value when received. Contributions are measured at their fair value at the time of the gift; the securities are measured at fair value.
How NFP’s report investments in its financial statements?
NFP organizations report investments in debt securities and those equity securities that have readily determinable fair values at fair value in the statement of financial position with gains and losses reported in the statement of activities.
Donated services in NFP’s
Donated services should be booked as both an expense and as contribution revenue at fair value as long as the services create/enhance a nonfinancial asset or require specialized skills that the provider possesses that would otherwise have to be purchased by the organization. Given that the roofer in this example was a professional who fixed the roof at no cost, the roof repairs should be booked as an increase (debit) to expense and an increase (credit) to contributions from donated services (contributions—nonoperating revenue).
Donated shares for NFP
Donated shares of stock are measured at their fair value on the date of donation.
Modified basis of accounting
The CAPITAL PROJECTS fund uses the modified accrual basis of accounting. The capital projects fund is a GRaSPP fund which uses the modified accrual basis of accounting. Proprietary funds (SE) and fiduciary funds (CIPPOE) use the full accrual basis of accounting.
Accrual basis of accounting
Proprietary and fiduciary funds (SE CIPPOE) use the accrual basis of accounting in combination with the economic resources measurement focus to measure and present transactions.
Note: Enterprise funds are proprietary funds.
Which governmental unit uses the modified accrual basis of accounting?
Special revenue funds are governmental funds, which use the modified accrual basis of accounting.
For governmental fund types, which item is considered the primary measurement focus?
Current financial resources
Permanent fund
The permanent fund uses the same basis of accounting as the special revenue funds. Both the permanent fund and the special revenue fund are governmental funds (GRaSPP), that use modified accrual accounting (revenues are recorded when measurable and available).
Governmental Activities
Modified Accrual
Financial Resources Management Focus:
(GRaSPP)
General
Special Revenue
Debt Service
Capital Projects
Permanent
Proprietary
Accrual
Economic Resources Management Focus:
(SE)
Internal Service
Enterprise
Fiduciary
Accrual
Economic Resources Management Focus:
(CIPPOE)
-Custodial
-Investment Trust
-Private Purpose Trust
Pension and Other Employee Benefit Trust
Types of Governmental Funds
The 5 types of governmental funds are:
1)General Fund
2)Special Revenue Funds
3)Debt Service Funds
4)Capital Projects Funds
5)Permanent Funds