Not-For-Profit Accounting Flashcards
WHAT Financial Statements are required for Nongovernmental not-for-profit organizations?
Statement of financial position
Statement of activities
Statement of cash flows
WHAT is the purpose of a Statement of Financial Position for a nongovernmental not-for-profit entity?
To provide relevant information about the assets, liabilities, and net assets, and about their relationships to one another at a moment in time
Remember the “Statement of Financial Position” is like your Balance Sheet (B/S)
Scenario: Nongovernmental not-for-profit organization borrowed $5,000, which it used to purchase a truck
WHERE should it show up on the organization’s statement of cash flows?
In cash inflow from (financing) activities and cash outflow from (investing) activities
i.e. The organization will report an inflow from financing activities from the borrowed $5,000
WHY? - Because Financing activities represent the cash flow effects of liability transactions.
The organization will also report a cash outflow from investing activities
WHY? - Because it used the proceeds to purchase a truck (PP&E).
True or False.
Contributions of resources to a Not-for-profit are considered unrestricted unless a restriction is imposed by the donor of the resources.
TRUE.
Contributions of resources to a not-for-profit are considered unrestricted unless a restriction is imposed by the donor of the resources.
E.g. $1,000,000 gift was received by Group Home Projects, a nongovernmental not-for-profit organization. Organizations’ board of directors stipulated that this gift must be invested for a period of four years, with the income to be used for general operations.
i.e. NO Restriction imposed by donor; therefore it would be unrestricted
True or False.
Pledges that have been made to a not-for-profit organization may be accrued.
TRUE.
Pledges that have been made to a not-for-profit organization may be accrued as receivables (net of an allowance for uncollectible amounts)
BY WHOM? - By the organization in the period in which they are made.
WHAT is an example of “Permanently Restricted” funds?
A contribution that is required by the donor to be used to make investments to be “held in perpetuity”
KEY WORDS: “held in perpetuity”
E.g. $100,000 contribution in which a donor requests investments to be held in perpetuity
HOW are unconditional pledges received by a nongovernmental not-for-profit organization that will be collected over more than one year be reported?
AS - Pledges receivable, valued at their present values
i.e. Not-for-profit organizations should accrue pledges as receivables (net of allowances for uncollectible donations) in the period in which they are made.
WHAT would be considered “other revenues and gains” on a Hospitals Statement of Activities?
AMOUNTS received for reasons other than the performance of health care related services that are available to be used at the discretion of the board.
E.g. Proceeds from sales at hospital gift shop and snack bar
True or False.
Depreciation is reported as a decrease in unrestricted net assets in the statement of activities.
TRUE.
As with any expense of a not-for-profit organization, depreciation is reported as a decrease in unrestricted net assets in the statement of activities.
Therefore; depreciation expense is a DECREASE in the Statement Of Activities
IF a donor gifts a treasury bill that cost the donor $50,000 but the treasury bills had a fair value of $22,000 at the time of the transfer, How much would the recipient report this gift in their Statement of Financial Position?
AT $22,000
WHY? - Because donor’s basis in the contribution is of no relevance to the organization in preparing its statement of financial position
E.g. The donor pays additional $500 for brokerage fees - NO Relevance to organization
Therefore they would use the Fair Value amount
True or False.
Assets are reported as “permanently restricted” when the restriction is imposed by parties outside parties or within the organization such as the board of trustees.
FALSE.
Assets are reported as permanently restricted when the restriction is imposed by parties outside the organization.
**If the board of trustees imposed a restriction they can subsequently decide to eliminate the restriction making it nonpermanent
WHERE in a Not-for-Profit Statement of Cash Flows would they report donor-restricted cash contributions for long-term-purposes?
Financing activity inflow
WHY? - Because “Financing” activities include permanently restricted contributions and contributions restricted for long-term purposes (i.e. Payments made on long-term debt, bonds, etc.)
WHAT categories are used in a nongovernmental not-for-profit organization’s statement of financial position?
Assets, Liabilities, and Net Assets
WHAT are the (3) categories of Net Assets reported in the “Net Assets” section of the Statement of Financial Position of a nongovernmental not-for-profit organization?
(1) Unrestricted net assets
(2) temporarily restricted net assets
(3) permanently restricted net assets
Scenario: Private, not-for-profit college receives endowment fund based on Equity Securities donated.
HOW would they report this year-end financial statements three years after the donation?
AT the fair value at the date of the financial statements
