FAR 8 - NFP and Governmental Part 1

Question 1

NFP required financial statements

Answer 1

1) Statement of Financial Position (BS)
2) Statement of Activities (IS)
3) Statement of Cash Flows

Question 2

Internal board-designated funds

Answer 2

Classified as net assets w/o donor restrictions

Question 3

What is included on the Statement of Financial Position

Answer 3

Assets
Liabilities
Net Assets
-w/o donor restrictions
-with donor restricitions

Question 4

What is included on the Statement of Activities

Answer 4

1) Change in total net assets
2) Change in net assets w/o donor restrictions
3) Change in net assets with donor restrictions
4) Revenues, gains
5) Expenses, losses

Question 5

Program services

Answer 5

Expenses of specific activities (ex. Universities = education and research)

Question 6

Support services

Answer 6

Expenses not classified as a program service (ex. Fundraising and administrative expenses)

Question 7

Functional classifications

Answer 7

Expenses categorized by major classes of program and support services

Question 8

Natural classifications

Answer 8

Specific expense categories, similar to general ledger titles (ex. salaries, rent, supplies, etc)

Question 9

Money spent

Answer 9

Equals money earned! Released from restrictions

Question 10

Revenues from exchange transactions (earning of resources for a performance of service)

Answer 10

Classified as net assets w/o donor restrictions (ex. student tuition, membership fees)

Question 11

Unconditional promises

Answer 11

Also known as a pledge, this is a contribution and is recorded at fair value of the promise made

Question 12

Conditional promises

Answer 12

Depends on occurrence. Do not recognize until conditions are met

Question 13

Donated collection items (art or statue)

Answer 13

Not required to be recorded by the NFP

Question 14

Donated materials

Answer 14

Record revenue at FV

Dr: Asset
Cr: Contribution - support

Question 15

Gross revenue from tuition and fees

Answer 15

Assessed student tuition and fees - canceled classes

Question 16

Revenue recognition in health care organizations

Answer 16

1) Patient service revenue = Gross patient service revenue - charitable services
2) Other operating revenue = Tuition, donated supplies, etc
3) Nonoperating revenue and support G/L = interest and dividen income, donated services, income from endowment funds, etc

Question 17

Recipient accounting (when a NFP accepts assets from a resource provider and agrees to use on behalf of, or transfer to a specified beneficiary)

Answer 17

1) Not financially interrelated / without variance power
Dr: Asset (FV)
Cr: Refundable advance liability

2) Not financially interrelated / with variance power
Dr: Asset (FV)
Cr: Contribution revenue

3) Financially interrelated / with or without variance power
Dr: Asset (FV)
Cr: Contribution revenue

Question 18

Financially interrelated organizations

Answer 18

1) One organization has the ability to influence the operating and financial decisions of the other and
2) one organization has an ongoing economic interest in the net assets of the other

Question 19

Beneficiary accounting

Answer 19

1) Not financially interrelated / no beneficial interests
Dr: Receivable
Cr: Contribution revenue

2) Not financially interrelated / beneficial interests
Dr: Beneficial interest
Cr: Contribution revenue

3) Financially interrelated
Dr: Interest in recipient net assets
Cr: Change in interest in recipient net assets (Equity)

Question 20

Endowment Funds

Answer 20

Assets established to provide income for a NFP (principal off limits but interest income used)

1) Board-designated endowment fund (without restrictions)
2) Donor-restricted endowment funds (with restricitons)

Question 21

Underwater endowments

Answer 21

A donor-restricted endowment fund for which the fair value of the fund at the reporting date is less than the original gift amount (reported as deficiency)

Question 22

Governmental fund overall structure

Answer 22

1) Governmental funds (GRaSPP)
2) Proprietary funds (SE)
3) Fiduciary funds (CIPPOE)

Question 23

Governmental funds accounting

Answer 23

• Modified accrual basis

- Current financial resources focus (no fixed assets or long term debt)

Question 24

Governmental fund types

Answer 24

GRaSPP

• General fund
• special Revenue fund
• debt Service funds
• capital Projects funds
• Permanent fund

Question 25

Proprietary / Fiduciary (Trust) funds accounting

Answer 25

- Full accrual basis | - Economic resources focus (include everything like fixed assets and LTD)

Question 26

Proprietary fund types

Answer 26

SE - internal Service funds - Enterprise funds

Question 27

Fiduciary (trust) fund types

Answer 27

CIPPOE - Custodial funds - Investment trust funds - Private purpose trust funds - Pension and Other Employee benefit trust funds

Question 28

Modified accrual revenues and expenses

Answer 28

1) Revenue is recognized when measurable and available (year + 60 days) 2) Expenditures are generally recorded when the related fund liability is incurred. Most notably, both interest and principal are not recognized until either due or paid

Question 29

Budgetary accounting journal entries

Answer 29

These budget accounts are opposite to normal accounts and only get booked twice a year (beg and close) Beg: Dr: Estimated revenue control Cr: Appropriations control Dr/Cr: Budgetary control (deficit (dr) or surplus(cr) **Entry reverse at the end of the year +/- any adjustments

Question 30

Types of non-exchange revenues (giving/receiving value without directly receiving equal value)

Answer 30

1) Derived tax revenues (sales tax, income tax) 2) Imposed non-exchange revenues (property tax, levied tax) 3) Government mandated 4) Voluntary * 1 and 2 will always recognize if time requirements are met (collected within 60 days of year-end)

Question 31

Modified accounting fixed assets purchases and long term debt

Answer 31

EXPENSE Fixed asset: Dr: Expenditure - capital outlay Cr: Vouchers pay or cash Long term debt proceeds: Dr: Cash Cr: Other financing sources - bonds issued Paying interest and principal: Dr: Expenditure - principal Dr: Expenditure - interest Cr: Cash

Question 32

Short term leases entry for government wide FS (lessor and lessee)

Answer 32

Lessor Dr: Receivable Cr: Revenue Lessee Dr: Lease expense Cr: Cash/Payable

Question 33

Contracts that transfer ownership

Answer 33

look at chart

Question 34

Leases other than short term and contracts that transfer ownership

Answer 34

look at chart