Not-For-Profit Accounting II

Question 1

WHAT type(s) of Not-For-Profit organizations prepare statements of functional expenses?

Answer 1

Voluntary health and welfare organizations (such as homeless shelters, and organizations such as the Red Cross and Greenpeace)

i.e. These are organizations that provide community services financed by voluntary contributions from the general public

Question 2

WHICH Financial Statement of a nongovernmental not-for-profit organization would a net asset restatement show up on?

Answer 2

THE Statement of Activities

WHY? - Because this statement shows those activities that occurred during a period that resulted in changes to net assets.

Question 3

True or False.

Contributions received by a not-for-profit organization in the current period are reported as revenues on the statement of activities.

Answer 3

TRUE.

Contributions received by a not-for-profit organization in the current period are reported as revenues on the statement of activities.

NOTE: Any “pledges” that have been made may be accrued as receivables (net of an allowance for uncollectible amounts) by the organization in the period in which they are made

Question 4

WHAT are considered “Program services” for a not-for-profit entity?

Answer 4

Refer to those costs incurred by a not-for-profit entity for the purpose of achieving the specific objective

E.g. Teacher salaries would be considered program services for an educational institution

Question 5

AT what amount are investments in debt securities for nongovernmental not-for-profit organizations reported?

Answer 5

Quoted market prices (i.e. fair value)

E.g. This would be reported in the “statement of financial position”

Question 6

True or False.

Contributions received by a not-for-profit organization that are unrestricted gifts of cash are reported as Temporarily Restricted Revenues.

Answer 6

FALSE.

Contributions received by a not-for-profit organization that are unrestricted (e.g. gifts of cash) are reported as revenues in the unrestricted assets section of the statement of activities.

NOTE: You would not report this as Temporarily Restricted

Question 7

ARE shares of marketable securities that are to be retained with no provision for their sale or other disposal reported as permanently restricted or Temporarily restricted?

Answer 7

Permanently Restricted

WHY? - Because there are donor-stipulations and the fund have no provision for their sale

Question 8

True or False.

ONLY unrestricted pledges –that have been made to a not-for-profit organization may be accrued as receivables (net of an allowance for uncollectible amounts) by the organization in the period in which they are made

Answer 8

FALSE.

All pledges—both unrestricted and restricted–that have been made to a not-for-profit organization may be accrued as receivables (net of an allowance for uncollectible amounts) by the organization in the period in which they are made.

Question 9

WHAT is an important factor to understand when it comes to Installment Sales?

Answer 9

THAT “Profits Change”

Therefore If you get a problem that asks you to calculate the profit for a year and the provide you with the previous years costs - you must factor how much profit was from last year to know what the current year profit is