FR - Accounting for Non-For Profit Organization Flashcards
Explain what Non for profit organization is
- Is an entity normally without transferable ownership interest organized and operated exclusively for social, educational, professional, religious, health
- Provides clear, unambiguously, information to stakeholders
Who are 3 users of the F/S for NPO
-Contributors, members
- Board of directors
- managers
- Creditors & Government
Which Handbook is used for NPO?
Part III - ASNPO - not complete standard but guides the specific area
Explain what Fund Accounting is
Fund Accounting - Is used for ASNPO for all organizations to segment its F/S based on the nature of various project, programs, expenditure
-Self- balancing set of accounts
Provide the four types of funds
- General fund - includes all item that are not subject to restriction
- Restriction fund - funds include all item that are subject to restriction in use
- Capital asset funds - Funds include all items that are related to capital assets (PPE amortization expense)
- Endowment fund - These are contributions where the principal balance must maintain the interest that is spent, and can be recorded as either a general or restricted fund
What is fund balance and what is it used for
Fund balance - summarizes the net excess of deficiency of assets over liabilities for each separate fund.
- The entity resources do not have to be segregated
Provide the 2 types of contribution method
- Deferred Method
- Restricted fund method
- Can choose but have to be consistent
Provide the three types of contributions
1, Unrestricted contribution - Can be used for any purpose, receivable is recognized
net: Amount to be received can be reasonably estimated
Ultimate collection is reasonably assured
- Restricted contribution - Contribution subject to the externally stipulated purpose of the contribution
- Must be used for specific funding - Endownment contribution - Require that some of the investment income be added back to the endowment
- Require that some or all the investment income be restricted for specific purposes making investment income restricted
- Allows for some or all investment income to be spent at NPO discretion making investment income unrestricted contribution
Explain how the four funds are used for the deferral method
Deferral method - records the contribution as revenue when related expenses are recognized. NPO waits for expenses that was contributed as revenue
Unrestricted contribution - recorded when meets a general criterion
Dr. Cash xx
Cr. Contribtuion revenue xx
Restricted contributions - Are deferred and recognized as revenue in the period in which related expenses are incurred
- restricted contribution expenses has occurred recorded as revenue in some period revenue expenses are recorded to same account
Dr. Cash
Cr. Deferred contribution
Dr. Expense (specific) xx
Cr. Cash/ A.P
Dr. Deferred contributio. xx
Cr. Contribtuion revenue. xx
Capital asset - not amortized
Dr. Capital asset (Specific type) xx
Cr. Deferral contribution. xx
or cash is to be contributed to asset
Dr. Cash xx
Cr. Deferred contribution xx
Dr. Capital asset
Cr. Cash
Amortization
Dr. Amortization expense. xx
Cr. Accumulated amortization. xx
Dr. Deferral’s contribution. xx
Cr. Contribution revenue. xx
Endowment contribution - Can’t be used to fund expenses - usually for investment
Dr. Cash xx
Cr. Net asset. xx
When cash is invested
Dr. Investment xx
Cr. Cash xx
Explain how the four contributions are used for the restricted fund
method
Restricted funds method - specialized used of fund accounting, where revenue is recorded in the period the contributed is received or receivable. Not deferred
Unrestricted contribution -
Dr. Cash - general fund xx
Cr. Contribution revenue - general fund xx
or specific fund
Dr. Cash (specific fund) xx
Cr. Contributed revenue (specified fund) xx
Restricted contribution - fund not set up, put deferred contribution until funds asset
Dr. Cash xx
Cr. Deferred contribution xx
operation expenses incurred
Dr. Expense (Specific type)- general fund xx
Cr. Cash/ A.P - general fund xx
Dr. Deferred contribution - general fund xx
Cr. Contribution revenue - general fund xx
Capital asset - Dr. capital asset fund xx
Cr. Contribution revenue - capital asset xx
Can also be purchase
Dr. Cash - capital asset fund. xx
Cr. Contribution revenue - capital asset fund xx
Endownment fund
Dr. Cash - endowment fund xx
Cr. Contribution revenue fund xx
- It immediately gets recognized as contribution revenue
Provide the other consideration for ASNPO for capital asset
Capital asset for ASNPO 4433 - Does not require a NPO with average annual revenue for the current and preceding period of $500000
Can choose to either
1. Directly expense the cost of tangible asset
2. Capitalize and amortize the cost of a tangible capital asset
- The amortization under the prospective basis recognized at FV
Explain how donated goods/ services are recognized for NPO
- The FV of contributed goods & services can be reasonably estimated
- Goods/ services are used in the normal course of operation and would have been purchased
- NPO may wish to record donated goods/ service to provide better information to stakeholder
Explain what pledge contribution is
Pledge contribution - to make future contributions to an NPO
- Difference of other receivables is not legal, binding the NPO does not have
- Any legal recourse against a sponsor that changes her/his mind and does not honor it.
