Not for profit organization

Question 1

Industries that uses not for profit accounting

Answer 1

Health care organization, educational institutions, voluntary health and welfare organizations,

Question 2

Required financial statements

Answer 2

Statement of financial position (bs), statement of activities (IS), statement of cash flows, statement of functional expenses (required for voluntary health and welfare organizations)

Question 3

Accounting method

Answer 3

Full accural

Question 4

Expense classification in the Statement of Activities

Answer 4

Program services, support services, and combined costs (fundraising + education)

Question 5

Statement of cash flows classification of sources

Answer 5

1. operating activities
2. financing; cash transactions related to borrowing but also include transactions related to certain restricted contributions.
3. other financing; interest and dividends restricted for reinvestment, payments of annuity obligation, payments from notes payable, payments on LT debt.
4. investing ; proceeds from the sale of works of art, investment in equipment, proceeds from the sale of assets

Question 6

Contributions and recognitions (Full accrual)

Answer 6

1. cash contribution; received = revenue
2. unconditional promises (pledge); recorded as revenue at its fair value when the promise is made.
3. conditional promises; recognition does not occur until the conditions are substantially met.
4. multi year pledge; recorded at the net present value at the date the pledge is made. the difference between the previously recorded present value and the current amount collected is considered contribution revenue, not Interest income

Question 7

Specialized support transactions

Answer 7

1. donated services (at FV)
   - Specialized skills
   - Otherwise needed by org
   - Measurable
   - Easily at FV
2. Donated collection item; not required to be recorded by the the org if
   - the item is part of a collection, which is held for public
   - is cared for
   - org have a policy that requires any proceeds from the sale of donated items to be reinvested in other collection item.
3. donated materials ; At FV

Question 8

JE for Restricted contributions

Answer 8

Pledge receivable - temp. restricted

Question 9

Exchange transactions

Answer 9

Amount transferred-FV dues/purchase = Contribution revenue

Question 10

Recipient accounting ; transfers of assets to a not for profit organization or charitable trust that raises or holds contributions for others

Answer 10

1. without variance power; NFP acts as agent/no benefit or power. Assets are valued at FV and recognized as a liability to the beneficiary
2. granted variance power; NFP acts as agent/has power, assets are valued at FV and recognized as contribution revenue when received and expensed when distributed to the beneficiary.
3. financially interrelated - granted variance power; contribution revenue

Question 11

Beneficiary accounting; Asset transfer

Answer 11

1. specified beneficiaries recognize their rights to assets held by others unless the recipient is explicitly granted variance power.
2. recognize interest - financially interrelated; the interest in the net assets of the recipient is adjusted for the beneficiaries share of the change.

Question 12

Investments in securities

Answer 12

• FV
• G/L; reported in the statement of activities as increases or decreases in unrestricted net assets unless the use of the investment is restricted, either temporarily or permanently, by explicit donor stipulations or by law.

Question 13

Derivatives

Answer 13

A NFP should recognize the change in FV of all derivatives in the period of the change.

Question 14

College and universities transaction application

Answer 14

1. Revenues; student tuition and fees (reported at gross amt), govt aid, grants, and contracts, gifts and private grants.
2. Expenses; scholarships and fellowship, maintenance and operation, administration and institutional, research, teaching.

Question 15

Health care organizations

Answer 15

1. Revenue
   - patient service revenue; accrual basis, gross basis and deductions are made (contractual adjustment, policy discount, admin adjustment)
   - charity care; not recorded as a receivable or as revenue
   - Central transactions; doctors, surgery, recovery room, and room/board
   - Other operating revenue; tuition from schools, revenues from educational programs, donated supplies and equipment, grants, cafeteria revenue, parking, gift shop, medical transcription
   - Non operating; donated services

Question 16

Voluntary health and welfare organizations

Answer 16

• Full accrual (cash or modified may be used if it’s not materially different)
• Revenue; contributions and pledges from the general public to support the activities of the organization.
• statement of functional expense = mandatory

Question 17

Classification of Net assets

Answer 17

Unrestricted, temporarily restricted, and permanently restricted