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FAR > NFP Accounting > Flashcards

NFP Accounting Flashcards

1
Q

Which financial statements are required for not - for - profit organizations?

A

Statement of Financial Position

Statement of Activities

Statement of Cash Flows

Statement of Functional Expense (Volunteer Health Organizations Only)

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2
Q

What are the major classifications found on a Statement of Financial Position?

A

Similar to Balance Sheet:Assets, Liabilities, Net Assets. Unrestricted Assets, Permanently Restricted Assets,Temporarily Restricted Assets

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3
Q

What are the major classifications in a Statement of Activities?

A

Similar to an Income Statement - organization - wide:Revenues,Expenses - ONLY deducted from Unrestricted Revenues,Gains and Losses,Changes in Net Asset classe,sUnrestricted/Permanently Restricted/Temporarily Restricted

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4
Q

What are the characteristics of a Statement of Cash Flows for not - for - profits? What are the major classifications?

A

Both direct and indirect methods are OK

Operating Activities - Unrestricted Revenues and Unrestricted Expenses

Investing Activities

Financing Activities - Endowments and restricted contributions

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5
Q

Which organizations are required to present a Statement of Functional Expenses?

A

Volunteer Health Organizations

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6
Q

Which statements are required for non - governmental hospitals?

A

Balance Sheet
Statement of Operations
Statement of Changes in Net Assets
Statement of Cash Flows
Financial Statement Notes

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7
Q

Which basis of accounting is used for revenues and net assets?

A

Accrual basis of accounting is used

Only external parties can restrict the use of assets (permanent or temporary)

Assets earmarked internally by management are still classified as unrestricted

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8
Q

What are the characteristics of unrestricted assets or revenue?

A

No restrictions or conditions placed on entity in order to use the resources

Note: assets earmarked internally by management are still unrestricted

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9
Q

When are revenues on contributions recognized?

A

Revenues on contributions are recognized in the year received - not the year the contribution is spent and are recorded at Fair Value on the date received

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10
Q

When are services rendered considered contributions?

A

If the organization would have otherwise paid for them

or

They increase the value of a non - monetary asset

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11
Q

Is hospital charity care revenue?

A

NO.

It is disclosed in the notes to the financial statements only.

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12
Q

How are unconditional pledges to contribute recorded?

A

Classified as revenue in the current year only - multi - year future contributions fall under Temporarily Restricted.

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13
Q

Which revenues are expenses deducted from?

A

Expenses ONLY deducted from Unrestricted Revenues - not Temporary or Permanently Restricted Revenues/Assets

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14
Q

What are the characteristics of temporarily restricted assets/revenue?

A

Use is restricted to a future time - which could then convert to unrestricted - Class: Temp. Restricted Revenue

Unrestricted contributions promised (including multi - year contributions) - but not yet received are actually restricted by time and are therefore classified as Temporarily Restricted Assets - Multi - year contributions are recorded at the present value of the future contributions

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15
Q

What are the characteristics of an endowment?

A

Use of investment is restricted - but income from investment could be either restricted or unrestricted

Must be under control of receiving entity (Quasi Endowment) in order to be recorded in unrestricted net assets

Otherwise - a memo entry is recorded

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16
Q

When is the donation of an art collection recognized as a contribution or asset?

A

Not recognized as assets or contribution revenue if they are held of display or education’ or their sale results in the purchase of similar items

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17
Q

When both Temporarily Restricted Assets and Unrestricted Assets are available for use - which assets are used first?

A

Temporarily restricted assets are used before Unrestricted assets.

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18
Q

How is a refundable advance recorded by a not for profit?

A

Classified as a Liability

Promise to contribute assets pending on certain conditions being met

Becomes unconditional once the possibility that it won’t happen is remote

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19
Q

How are investments recorded and valued in not - for - profit accounting?

A

Fair Value is mostly used

Exception - Equity method used when significant influence exists

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20
Q

How are scholarships recorded?

A

As a reduction of revenue - netted against college’s tuition

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21
Q

How is depreciation expense recorded by a not - for - profit?

A

Depreciation expense is allocated proportionately to various functions

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22
Q

Unrestricted Net Assets

A

resources of the NPO that are available for the general use of the entity and can include assets set aside by the board of trustees, since a true restriction must come from an outside source

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23
Q

Temporarily Restricted Net Assets

A

resources of the NPO that have been donated by a third party who has placed a restriction as to either how the resources are to be used, or when the resources may be used (time or use/purpose)

24
Q

Permanently restricted net assets

A

resources usually cash or investment securities, donated by a third party where the donor stipulates that the principal, or corpus, may never be spend but may be invested. The earnings from that investment may be restricted or unrestricted, depending on the donor’s stipulations (endowments)

25
Q

Statement of Activities sections:

A

revenues/gains
net assets released from restriction
expenses

26
Q

Expenses in a NPO are recorded where?

A

under unrestricted net assets in the statement of activities

27
Q

articulation in NPO financial statements

A

net asset totals from statement of financial position should be reflected on the statement of activities net assets at end of the year.

28
Q

There is no net effect on unrestricted net assets from the reclassification from temporary to unrestricted on the statement of activities because

A

it is then expensed out; there is a reduction in temporarily restricted net assets (net change due to reduction)

29
Q

What is the journal entry for receiving unrestricted gifts of cash?

A

Cash (operating activity)

Revenues- Unrestricted Net Assets

30
Q

What is the journal entry for receiving temporarily restricted gifts of cash?

A

Cash (operating activity)

Revenues- Temporarily Restricted Net Assets

31
Q

What is the journal entry for the reclassification of a temporarily restricted net asset to an unrestricted net asset (when the TRNA meets its stipulation)?

A

Net Assets released(TRNA)
Net assets released(UNA)
to record the release of the restriction and reclassify the net asset

Expenses (UNA)
Cash
to spend the net asset to meet the obligation

**the net of the increase in UNA and the increase in Expense has no effect on UNA. Cancel it out.

32
Q

what is the journal entry for a contribution made that is permanently restricted?

A

Cash (financing activity)

Revenues (PRNA)

33
Q

What is the journal entry for the interest income earned from a PRNA?

A

Cash

Revenues (TRNA)

34
Q

What are the sections of the Statement of Cash Flows for an NPO?

A

Operating- inflows (revenues collected), outflows (expenses paid), contributions that can be spent on operations are included also

Investing- proceeds from the sale of assets and sales of works of art (inflows), and outflows include payments for asset purchases

Financing- inflows (proceeds from loans), outflows (principal payments on loans), contributions that are permanently restricted or may only be spent on acquisition of assets; permanently restricted revenue, money restricted for L/T purpose, payment on bonds, Notes Payable, money restricted for endowment, money restricted for acquisition of PP&E

35
Q

Change in Net ASsets

A

comes from statement of activities and used to reconcile adjustments to cash on cash flow statement

36
Q

Net decrease in cash and cash equivalents from cash flow statement should be same as

A

difference between year one and year two of cash on statement of financial position

37
Q

VHWO

A
  • voluntary health and welfare organization
  • provides community services financed by voluntary contributions from the general public
  • must prepare a statement of function expenses other NPO has option to prepare or can disclose on notes to the financial statements
38
Q

What is included in the statement of functional expenses?

A

Public support (donated), contributions, grants, bequests, pledges, special event revenues
+ Revenues (earned), membership dues, investment income, client service revenue, fees
-Program Expenses
-Support Expenses
=Excess of Revenues over Expenses

39
Q

What are program services?

A

further the mission of the organization

-expenses directly related to the program

40
Q

What are supporting services?

A
  1. ) Management and General- marketing, tax preparation, printing annual report, business management, budgeting, costs of soliciting funds other than contributions and membership dues, advertising, promotion costs, contract costs
  2. ) Fund Raising- print and mail pledge cards, maintaining donor lists, preparing and distributing fund raising materials, and conducting other activities designed to solicit contributions
  3. ) Membership Development- soliciting for potential members and for dues, costs associated with member relations and similar activities
41
Q

Donation of services

A

not recorded unless services provided are professional and would normally be compensated. If the services are professional then record as a:
Expenses-UNA
Contribution Revenue- UNA

42
Q

Contributions of Property

A

normally reported as revenues in the same manner as contributions of cash, Can be permanently restricted, temporarily restricted, or unrestricted

43
Q

Donations of arts, artifacts, or antiques

A
  • if NPO uses them for display, research, or to sell only to reinvest in other collections with its proceeds, then the NPO can exclude the donation from its financial statements entirely
  • if the above requirements are not met then the NPO would recognize both an asset and a revenue
44
Q

Receiving donated materials

A

record both an asset and a support revenue

-if materials are pass through then record as an expense and credit to unrestricted contribution revenue

45
Q

Gifts in Kind

A

noncash contributions to a NPO, recorded at FMV

46
Q

Marketable Securities

A
  • FMV
  • report realized and unrealized gains and losses directly in the statement of activities
    1. ) Trading- fmv; unrealized gains/losses on statement of activities
    2. ) AFS- fmv; unrealized gains/losses on statement of activities
    3. ) Held to Maturity- Bonds
  • does not cover equity securities
47
Q

Pledges

A
  • unconditional promise to give
  • accrued as receivables net of allowance in the period in which they are made
  • pledges are recorded at PV for annuities
48
Q

Conditional promises to give

A
  • matching of funds
  • not recognized as revenue until they become conditional ie, when the conditions on which the promise depends have been substantially met or there is only a remote likelihood that the conditions on which the promise depends will not be met

-if funds received before promise is met then record as a liability until met

49
Q

Agent or Trustee

A

Record as Revenue if..

  1. ) they have variance power over the donation to redirect the money
  2. ) they beneficiary of the donation is financially related

Record as Liability if….
1.) none of the criteria above is met ie no discretion as to how funds will be used; working purely as an agent

50
Q

Depreciation

A

record using same criteria as for a for profit business

51
Q

Colleges and Universities

A
  • tuition remissions and scholarships are revenue

- refunds are not revenue

52
Q

Patient Service Revenue

A

gross billings at established rates BEFORE reductions for discounts granted to insurance groups and employees (excludes charity care which is not billed at all)

53
Q

Net Patient Service Revenue

A

patient service revenue after reductions for discounts and contractual adjustments for third party payments (NOT BAD DEBT EXPENSE which is claimed under operating expense)

54
Q

Statement of Operations (Activities)- Hospital

A

PP NO ONE

patient service revenue (hotel type, medical, lab) - Provision for contractual adjustments (medicare, employee discounts, not charity)= patient service revenues

Net Patient Service Revenues + Other Operating Revenues, gains, and losses (earned) (non-medical, donated medicines and blankets, restricted donations, unrestricted interest and dividends, net assets released from restriction used for operations) - Operating Expenses (Bad Debts, drugs, doctors, depreciation) + Non-Operating Revenues (unearned) (unrestricted donations, donated services) = Excess of Revenues/Expenses

55
Q

what are the two financial statements of hospitals?

A

statement of operations (activities) and statement of changes in net assets

56
Q

on financing section of statement of cash flows financing section includes

A

cash reserved for the acquisition of property

57
Q

on the investing section of statement of cash flows includes

A

amount actual spent for property

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