Not for Profit

Question 1

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

Answer 1

Statement of Financial Position

Statement of Activities

Statement of Cash Flows

Statement of Functional Expense (Volunteer Health Organizations Only)

Question 2

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

Answer 2

Similar to Balance Sheet:

Assets
Liabilities
Net Assets
Unrestricted Assets
Permanently Restricted Assets
Temporarily Restricted Assets

Question 3

What are the major classifications in a Statement of Activities?

Answer 3

Similar to an Income Statement - organization - wide:

Revenues
Expenses - ONLY deducted from Unrestricted Revenues
Gains and Losses
Changes in Net Asset classes
Unrestricted
Permanently Restricted
Temporarily Restricted

Question 4

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

Answer 4

Both direct and indirect methods are OK

Operating Activities - Unrestricted Revenues and Unrestricted Expenses

Investing Activities

Financing Activities - Endowments and restricted contributions

Question 5

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

Answer 5

Volunteer Health Organizations

Question 6

Which statements are required for non - governmental hospitals?

Answer 6

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

Question 7

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

Answer 7

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

Question 8

What are the characteristics of unrestricted assets or revenue?

Answer 8

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

Note: assets earmarked internally by management are still unrestricted

Question 9

When are revenues on contributions recognized?

Answer 9

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

Question 10

When are services rendered considered contributions?

Answer 10

If the organization would have otherwise paid for them

or

They increase the value of a non - monetary asset

Question 11

Is hospital charity care revenue?

Answer 11

NO.

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

Question 12

How are unconditional pledges to contribute recorded?

Answer 12

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

Question 13

Which revenues are expenses deducted from?

Answer 13

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

Question 14

What are the characteristics of temporarily restricted assets/revenue?

Answer 14

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

Question 15

What are the characteristics of an endowment?

Answer 15

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

Question 16

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

Answer 16

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

Question 17

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

Answer 17

Temporarily restricted assets are used before Unrestricted assets.

Question 18

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

Answer 18

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

Question 19

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

Answer 19

Fair Value is mostly used

Exception - Equity method used when significant influence exists

Question 20

How are scholarships recorded?

Answer 20

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

Question 21

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

Answer 21

Depreciation expense is allocated proportionately to various functions

Question 22

what type of revenue is cafeteria revenue for a hospital?

Answer 22

other revenue (not ancillary/patient svcs/expense)

Question 23

Fundraising expenses are expenses that…

Answer 23

are incurred to induce contributions

Question 24

What type of funds are Board designated funds? (U,T,P)

Answer 24

Unrestricted (think back to preschool example)

Question 25

Contribution of cash is revenue when…

Answer 25

received (but only if cash is the first step of donation process, otherwise would be revenue when pledged etc.)

Question 26

Unconditional promises are revenue when…

Answer 26

pledged (remember to use allowance for pledged revenue)

Question 27

Conditional promises are revenue

Answer 27

when earned/spent. So even if you have the money if there are stipulations by donor only when you expend can you recognize revenue

Question 28

Resources are…

Answer 28

revenue/other supplort, but can also be an expense

Question 29

Multi-year pledge, revenue amount is

Answer 29

PV of pledge (any difference due to passage of time is contribution revenue not interest revenue)

Question 30

Difference between FV and amount paid for something (i.e. charity tickets)

Answer 30

contribution revenue

Question 31

SOME

Answer 31

Special skills required and possessed by donor, Otherwise needed by org, Measurable, Easily (@ FV)

Must: 1. create/enhance asset or 2. require skill

Question 32

Beneficiary and NFP are financially interrelated? If just getting from a pool of assets (ben.)?

Answer 32

Equity, Revenue

Question 33

Operating Activities

Answer 33

Contributions
Program income
Interest income, some div income
designated to be used for long-lived assets

Question 34

Financing Activities (#2)

Answer 34

Borrowing & some restricted contributions–those where donor imposes restrictions limiting LT purpose (e.g. endowments, purchase of assets, annuities…actual contribution is FA, purchase of items is IA)

Question 35

Investing Activities (#3)

Answer 35

Proceeds from sale of art/purchase of art, equipment purchase, proceeds from equip sale—whose sale proceeds were restricted to Equipment

Question 36

Temporary restriction (3 ways)

Answer 36

1. purpose, time, acquisition

Question 37

if donor has stipulations, what type of asset/revenue is it?

Answer 37

restricted. rev in pd received. Increase in T or P net assets

Question 38

restrictions become satisfied—>

Answer 38

moves to unrestricted; report on statement of activities as simultaneously increasing one net asset class and decreasing another (think of highlighted row from lectures)

Question 39

Expenses do what to assets

Answer 39

decrease UNRESTRICTED assets only

Question 40

categories of expenses

Answer 40

program, support services & combined costs

Question 41

Program expenses

Answer 41

education, hospital care, etc.

Question 42

Support services expenses

Answer 42

fund-raising, administration, mgmt, general

Question 43

combined “costs” /(expenses)

Answer 43

combine fund-raising with education (mix of program and support expenses)