Non-For Profit Flashcards
What is the accounting formula for Not-for-Profit?
Assets-Liabilities=Residual Interest.
In non-for profits, residual interest represents the stockholder’s owners equity. Not-for-profit do not have residual interest, it’s simply referred to as net assets.
What are pledges in a not-for-profit?
Pledges to a not-for-profit organization may have restrictions or conditions. Pledged resources with restrictions are revenue but reported separately from unrestricted amounts. Pledged resources with conditions are not recognized until the conditions have been satisfied.
How is an unconditional promised to a NPO recorded?
When a resource is unconditionally promised to a NPO, the NPO will record revenue and accrue a receivable in the period pledged. Pledges are recorded with a contra account that reflects the amount of the pledge expected to be uncollectible.(ie. allowances for uncollectible pledges)
What are the NPO financial statements?
Statement of financial position is equivalent to the balance sheet in a for profit.
Statement of activities is equivalent to the income statement in a for profit.
Statement of cash flows is the same for a non profit.
Statement of functional expenses, this is does not exist in a for profit.
What is considered revenue for donations of time spent with performing services?
When an NPO donations of specialize service requiring special skills, this is considered as revenue
How do not-for-profit organizations report donated investments of debt and equity securities?
The securities must be reported at fair value (FV) on the statement of financial position. By doing so each period, investments are adjusted up or down to FV with unrealized gains and losses from the FV changes reported directly in the statement of activities.
How is donor-imposed restrictions on a not-for-profit accounted for?
These resources are usually satisfied theough the passage of time or when the NPO uses the resources according to the donor’s wishes. When the restriction is satisfied, that amount is reclassified out of net assets (with restrictions) and into net assets (without restrictions).
What is the presentation of functional expenses?
These can be divided into two categories:
- Program Services - these are activities that fulfill the NPO mission or purpose through the distribution of goods and services to beneficiaries, customers or members.
- Supporting Services - these are any activities of the NPO that includes management, fundraising, membership development and general expenses.
How are endowments treated in an NPO?
Endowments come with the restriction to invest the principal amount donated. However, unless explicitly restricted by donor or law, the investment earnings can be used for the organization’s general operations. In other words gains(losses) realized from the endowment’s investments are reported as increases(decreases) in net assets without donor restrictions.
How do NPO serve as intermediaries?
NPO often serves as middle men by receiving donated assets with the purpose of redirecting them to other entities. However, how a donation is recorded as revenue or as a liability solely depends on the directives of the donor and whether the NPO has the power to redirect the funds to entities of its choosing.
What are the 3 sections of the annual comprehensive financial report?
- Introductory - this includes a transmittal letter and general information about the entity (eg. officers’ names)
- Financial - this contains basic financial statements, MD&A and required supplementary information on only the current fiscal year.
- Statistical - this contains financial trends as well as economic and demographic information (eg. employee headcount, median age, number of capital assets), typically in the form of statistical tables and schedules covering 10 fiscal years.
How do you record a JE for an issuance of a government unit’s PO for goods and services?
When recording this Encumbrances are debited and reserve for encumbrances is credited. When the PO is fulfilled, two entries are made, ie. one to reverse the initial entry and another to record the amount of the actual invoice from the vendor.
