Not-For-Profit accounting

Question 1

What is primary purpose of the statement of activities for a nongovernmental not-for-profit organization?

Answer 1

To report the change in net assets for the period

Question 2

How are revenues, expenses, gains, and losses classified for nongovernmental not-for-profit organization?

Answer 2

They are classified according to the net asset class affected.

They are reported based on restrictions or functional subclassification.

Question 3

What reports are required by a nongovernmental, not-for-profit?

Answer 3

3 primary financial statements

1. statement of financial position (balance sheet)
2. statement of activities (income statement or statement of revenues and expenses)
3. statement of cash flows, with accompanying notes to financial statements

Question 4

How are revenues reported in the statement of activities?

Answer 4

increases in net assets without donor restrictions unless the use of assets received is limited by donor-imposed restrictions

Question 5

For a NFP, how else is the statement of activities able to be broken down?

If done, what is the requirement?

Answer 5

Can be broken down into operating and nonoperating components

Required to report the change in unrestricted net assets for the period on the statement of activities.

Question 6

For a nongovernmental not-for-profit, what is the appropriate characterization of the net assets?

Answer 6

Residual interest

Residual interest of the entity that remains after deducting its liabilities

Question 7

What are the required disclosures for a NFP?

Answer 7

They are required to disclose information about:

• the nature, type, and amount of the different types of restrictions that impact how and when, if ever, the donor-restricted net assets can be used.
• the amounts and purposes of board designations of net assets without donor restrictions
• any governing board actions that result in self-imposed limits on the use of resources

Question 8

What are the three options for reporting collections for a nongovernmental NFP organization?

Answer 8

1. Capitalize collections purchased or donated after the effective date of the FASB’s guidance on accounting for collections ( and recognize contributions revenue equal to the fair value of such collections
2. Do not capitalize collections (no contributions would be reported for donated collections, and expenses would be reported for purchases of collections)
3. Capitalize all collections purchased or donated (and recognize contributions revenue equal to the fair value of the collections that are donated)

Question 9

Where should the amounts and purposes of board-designated net assets be disclosed for a nongovernmental NFP?

Answer 9

The options exists to disclose either on the face of the statement or financial position or in the notes to the financial statements

Question 10

In the cash flow statement for a not for profit entity, how would unrestricted cash contributions be reported?

Answer 10

Operating activities

Question 11

In the cash flow statement for a not for profit entity, how would restricted cash contributions be reported?

Answer 11

Financing activities if they are restricted for long-term purposes