NFP Accounting and Governmental Accounting

Question 1

What are the types of funds classified under Accrual Funds?

Answer 1

(Proprietary)-ISE, Internal Service, Enterprise
(Fiduciary)-CIPPO-Custodial, investment trust, Pension, Private purpose

Accrual Funds are divided into proprietary and fiduciary categories.

Question 2

What are the types of funds classified under Modified Accrual Funds?

Answer 2

(Governmental)GRASPP-General, Special Revenue, Debt Service, Capital Projects, Permanent

Modified Accrual Funds are primarily used by governmental entities.

Question 3

What is the purpose of the Statement of Financial Position?

Answer 3

Same purpose as Balance Sheet

It provides a snapshot of an organization’s financial status at a given time.

Question 4

What does the Statement of Activities provide information about?

Answer 4

Changes in Net Assets with or without donor restrictions

It is similar to the Income Statement.

Question 5

How is Contribution Revenue (Unconditional) recorded?

Answer 5

Only record the difference when an exchange transaction is involved

Example: For a $150 donation in exchange for $100 FV tickets, only $50 is recorded.

Question 6

What does the Statement of Net Position present?

Answer 6

Proprietary presents

It reflects the financial position of proprietary funds.

Question 7

What are the three functional classifications of expenses by Nonprofits?

Answer 7

• Program services
• Management/General
• Fundraising/support

These classifications help in understanding how resources are allocated.

Question 8

What financial classifications could Local Government use?

Answer 8

GRASPP and CIPPOE

These classifications are applicable for local government accounting.

Question 9

What is a measurable performance barrier?

Answer 9

Specific outcomes/outputs

It refers to the criteria used to evaluate performance in non-profit organizations.

Question 10

How is donated property recorded?

Answer 10

At Fair Value (FV)

This ensures that the asset is valued accurately on the financial statements.

Question 11

What is required for functional classification and disclosure by NFP?

Answer 11

A not-for-profit organization needs to report its expenses in the statement of activities by their functional classification (program classification, supporting activities, fund-raising, etc.) and disclose the expenses in a natural classification by function in the notes to the financial statements

This is necessary for transparency in financial reporting.

Question 12

What basic information does FASB provide on NFP?

Answer 12

Basic information on NFP

FASB sets standards for financial reporting for non-profit organizations.

Question 13

When is a conditional promise recognized?

Answer 13

Not recognized until ALL conditions met

Conditional promises depend on specific requirements being fulfilled.

Question 14

When should a Historical Artifact not be recognized as a contribution?

Answer 14

• Held for public viewing
• Protected and cared for by the organization
• Proceeds reinvested in other collections

These criteria help determine the status of historical artifacts in financial statements.

Question 15

What is considered the most difficult aspect of relevance in financial reporting?

Answer 15

Most difficult to accomplish

Relevance ensures that the information is useful for decision-making.

Question 16

What do Government Wide Financial Statements utilize?

Answer 16

Economic resources/Full accrual

This approach provides a comprehensive view of a government’s financial activities.

Question 17

What is an Exchange Transaction?

Answer 17

Resources provided in exchange, do not constitute contributions

It involves an exchange of value between parties, increasing assets without restrictions.

Question 18

What does Total Contribution Revenue equal?

Answer 18

Pledged revenue and received revenue

This metric provides insight into the total financial support received by an organization.

Question 19

What happens when a Beneficiary recognizes a change in interest?

Answer 19

Beneficiary and Recipient organizations

This reflects a shift in the financial relationship between parties.

Question 20

In a not-for-profit organization, which of the following should be included in total expenses:

1)Grants to other organizations
2)Depreciation

Answer 20

Both

Question 21

The measurement focus of governmental-type funds is on the determination of

Answer 21

the flow of current financial resources and resulting financial position.

Question 22

Rule: Not-for-profit organizations record donated services SOME of the time, when services meet the following criteria

Answer 22

Specialized skill

Otherwise needed

Measured

Easily

Services are also recognized when a long-lived asset is enhanced.

Question 23

Restricted Cash is a ______Asset

Answer 23

Non Current Asset

Question 24

Effective rate of interest when loan fee is included

Answer 24

Interest Rate +Loan fee/(1-Loan fee)

Question 25

Rule: Whenever income is recognized in the financial statement before it is reported as taxable income, a __________ should be reported.

Answer 25

a deferred tax liability Even though a loss might recognized in Year 2, on a cumulative basis the financial statements have recognized income that has not yet been recognized for tax purposes.

Question 26

A not-for-profit organization that does not recognize and capitalize its collections should report the following on the face of its statement of activities separately from revenues, expenses, gains, and losses

Answer 26

Costs of collection items purchased as a decrease in the appropriate class of net assets Proceeds from sale of collection items as an increase in the appropriate class of net assets Proceeds from insurance recoveries of lost or destroyed collection items as an increase in the appropriate class of net assets

Question 27

Combined Costs(NFP)

Answer 27

When common costs are incurred, they should be allocated to the appropriate classifications.

Question 28

A conditional promise to give is not recognized as revenue until

Answer 28

all of the pertinent conditions are met

Question 29

How is exchange revenue classified?

Answer 29

Without restrictions

Question 30

How is Dividend Income earned classified on the cash flow statement?

Answer 30

Operating

Question 31

How is interest earned on Endowment and interest payment on short term loans classified on the cash flow statement?

Answer 31

Operating

Question 32

Fund that accounts for the proceeds of specific revenue sources that are restricted or committed to expenditure for a specified purpose

Answer 32

Special Revenue funds are set up to account for revenues from specific taxes or other earmarked sources that are restricted or committed to finance particular activities for a government.

Question 33

Resources that are legally restricted to the extent that only earnings, and not principal, may be used for purposes supporting the reporting government’s programs

Answer 33

Permanent funds are used to report resources that are legally restricted to the extent that income, and not principal, may be used for purposes that support the reporting government's programs.

Question 34

The fund most likely used by a municipality undertaking the construction of a utility plant financed by revenue bonds.

Answer 34

Enterprise funds are set up to account for the acquisition and operation of governmental facilities and services that are intended to be primarily self- supported by user charges.

Question 35

The fund most likely used by a school board securing debt to finance the construction of an expanded network of K-12 schools and the renovation of existing facilities.

Answer 35

Capital project funds are set up to account for resources used for the acquisition or construction of major capital assets by a governmental unit, except those financed by proprietary or fiduciary funds.

Question 36

The fund most likely used by a county to account for activities of a vehicle maintenance pool that is responsible for providing support to all county vehicles on a fee-for-service basis.

Answer 36

Internal Service funds are set up to account for goods and services provided by designated departments on a fee basis to other departments and agencies within a single governmental unit or to other governmental units.

Question 37

The fund most likely used by the Clerk of the Court to account for alimony payments in accordance with court orders related to divorce decrees. Alimony deposits are remitted to benefitting parties net of a fee.

Answer 37

Custodial funds account for resources in the temporary custody of a governmental unit. Fees are accounted for as a liability to another fund.

Question 38

Rule: Separate fund financial statements should be presented for governmental and proprietary funds to _____

Answer 38

report additional and detailed information about the primary government