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Flashcards in NFP Accounting Deck (35)

Which financial statements are required for not - for - profit organizations?

Statement of Financial Position

Statement of Activities

Statement of Cash Flows

Statement of Functional Expense (Volunteer Health Organizations Only)


What are the major classifications found on a Statement of Financial Position?

Similar to Balance Sheet:

Net Assets
Unrestricted Assets
Permanently Restricted Assets
Temporarily Restricted Assets


What are the major classifications in a Statement of Activities?

Similar to an Income Statement - organization - wide:

Expenses - ONLY deducted from Unrestricted Revenues
Gains and Losses
Changes in Net Asset classes
Permanently Restricted
Temporarily Restricted


What are the characteristics of a Statement of Cash Flows for not - for - profits? What are the major classifications?

Both direct and indirect methods are OK

Operating Activities - Unrestricted Revenues and Unrestricted Expenses

Investing Activities

Financing Activities - Endowments and restricted contributions


Which organizations are required to present a Statement of Functional Expenses?

Volunteer Health Organizations


Which statements are required for non - governmental hospitals?

Balance Sheet
Statement of Operations
Statement of Changes in Net Assets
Statement of Cash Flows
Financial Statement Notes


Which basis of accounting is used for revenues and net assets?

Accrual basis of accounting is used

Only external parties can restrict the use of assets (permanent or temporary)

Assets earmarked internally by management are still classified as unrestricted


What are the characteristics of unrestricted assets or revenue?

No restrictions or conditions placed on entity in order to use the resources

Note: assets earmarked internally by management are still unrestricted


When are revenues on contributions recognized?

Revenues on contributions are recognized in the year received - not the year the contribution is spent and are recorded at Fair Value on the date received


When are services rendered considered contributions?

If the organization would have otherwise paid for them


They increase the value of a non - monetary asset


Is hospital charity care revenue?


It is disclosed in the notes to the financial statements only.


How are unconditional pledges to contribute recorded?

Classified as revenue in the current year only - multi - year future contributions fall under Temporarily Restricted.


Which revenues are expenses deducted from?

Expenses ONLY deducted from Unrestricted Revenues - not Temporary or Permanently Restricted Revenues/Assets


What are the characteristics of temporarily restricted assets/revenue?

Use is restricted to a future time - which could then convert to unrestricted - Class: Temp. Restricted Revenue

Unrestricted contributions promised (including multi - year contributions) - but not yet received are actually restricted by time and are therefore classified as Temporarily Restricted Assets - Multi - year contributions are recorded at the present value of the future contributions


What are the characteristics of an endowment?

Use of investment is restricted - but income from investment could be either restricted or unrestricted

Must be under control of receiving entity (Quasi Endowment) in order to be recorded in unrestricted net assets

Otherwise - a memo entry is recorded


When is the donation of an art collection recognized as a contribution or asset?

Not recognized as assets or contribution revenue if they are held of display or education' or their sale results in the purchase of similar items


When both Temporarily Restricted Assets and Unrestricted Assets are available for use - which assets are used first?

Temporarily restricted assets are used before Unrestricted assets.


How is a refundable advance recorded by a not for profit?

Classified as a Liability

Promise to contribute assets pending on certain conditions being met

Becomes unconditional once the possibility that it won't happen is remote


How are investments recorded and valued in not - for - profit accounting?

Fair Value is mostly used

Exception - Equity method used when significant influence exists


How are scholarships recorded?

As a reduction of revenue - netted against college's tuition


How is depreciation expense recorded by a not - for - profit?

Depreciation expense is allocated proportionately to various functions


Define Permanently Restricted Resources

Resources such as certain assets, such as artwork, etc. that must be maintained or used in a certain way

Endowments that represent funds that must be invested permanently

Land when it must be held in perpetuity


Define Split Interest Agreement

An arrangement whereby both the donor (or beneficiary) and a not for profit organization receive benefits


Define Temporary Restricted Resources

Resources restricted to be

Used for a particular purpose

Expended at a time in the future

Invested for a period of time


Identify the 4 required elements in the statement of activities for NFP's

Total Net Assets
Permanently Restricted Net Assets
Unrestricted Net Assets
Temporarily Restricted Net Assets


What is the recognition criteria for cash contributions

As revenues or gains in the period in which they are received, measured at fair value at the date of gift


What is the recognition criteria for unconditional pledges

recorded at fair value when received


what is the recognition criteria for conditional pledges

recognition occurs when the future event occurs or is met


What is the recognition criteria for multi-year pledges

They are recorded at Net Present Value at the date the pledge is made, with future collections considered temporarily restricted by time


How are pledges accounted for

Unconditional promises to contribute in the future are reported as restricted support at the present value of the estimated future cash flows using a discounted rate commensurate with the risks involved


How are donated materials account for?

They are recorded as revenue at fair value on the date of receipt.

Contributions of works of art, historical treasures need not be recognized as revenue if they are protected by the organization for display and if sold the proceeds of the sales are designated for the acquisitions of other works.


How are Marketable Securities reported

All debt securities and those equity securities that have readily determinable fair values are measured at Fair Value


For a university , identify Common Unrestricted Revenues

Common Unrestricted revenues include

Student Gross Tuition and Fees
Gifts and Private Grants
Endowment Income
Government Aid
Grants and Contracts
Sales and Services of Educational Departments Revenues of Auxiliary Enterprises


What is included in other operating revenue for health care entities

Tuition from schools
Eductional Programs
Donated supplies and equipment
Specific Purpose Grants


What is included in non operating revenue, gains, and losses

Unrestricted interest and dividend income

Unrestricted grants

Donated services