Financial Statements For Nonprofits

Question 1

Statement of Financial Position

Answer 1

Balance Sheet for NFP organizations

Question 2

Main difference of BS and Statement of Financial Position

Answer 2

“Net Assets” instead of Shareholders’ equity

Assets = Liabilities + net assets

Question 3

Two categories of net assets

Answer 3

1. Net Assets without Donor Restrictions

2. Net Assets with Donor Restrictions

Question 4

Net Assets without donor restrictions

Answer 4

Assets that have no restrictions and that the NFP can use how they want.

Question 5

Net Assets with Donor Restrictions

Answer 5

Net Assets with either a time restriction, purpose restriction, or even a permanent restriction. All restrictions are set by the donor at the time of the donation.

Question 6

Statement of Activities Focus

Answer 6

Changes in each group of net assets

Question 7

3 main segments of Statement of Activities

Answer 7

1. Changes in net assets without donor restrictions. Starts with Revenues and Gains this includes contributions, fees and investment gains free from donor restriction. Next is net assets released from restriction. Then Expenses and losses which are broken out by program. Note that all expenses for the NFP will be listed in the unrestricted section.
2. Changes in net assets with donor restrictions
3. Changes in permanently restricted net assets

Question 8

Bottom line on NFP Statement of Activities

Answer 8

Changes in Net Assets instead of Net Income

Question 9

Do unrealized gains and dividends stay on the statement of activities within the designation of the original investment

Answer 9

Yes

Question 10

Three ways to report the Statement of functional expenses

Answer 10

1. Within the statement of activities
2. Schedule in the notes to the financial statements
3. Separate financial statement

Question 11

What does nature and fiction mean

Answer 11

Means expenses are broken out to show what was spent on “program services” and “supporting services”

Question 12

Program Services

Answer 12

Expenses directly related to the programs that fulfill the mission of the NFP.

Question 13

Supporting Services

Answer 13

Management and general expenses, and fundraising

Question 14

Statement of Cash Flows

Answer 14

Changes in net assets is part of the operating activities section. Unrestricted cash transactions will be reflected in the operating activities section, but any cash transactions with long-term restrictions appear in the financing section. Also, dividends received on investments with long-term restrictions would also be included in the financing activities section.

Question 15

Investing activities section of Statement of Cash Flows

Answer 15

Same types of transactions that would appear in the investing section of a regular statement of cash flows

Question 16

Updated definition of a “Collection” and Use of Proceeds

Answer 16

When an entity sells a “Collection” proceeds from the sale can be used to either acquire new items or directly care for existing items already in possession. Previously the proceeds could only be used to acquire additional collections.

Collections refers to groupings of art, historical treasures or similar items that are 1) held for public 2) preserved and protected, and 3) when sold, the proceeds are reserved for specific uses.