Flashcards in Non-Profit Accounting Deck (56)
Which financial statements are required for non-profit organizations?
Statement of Financial Position, Statement of Activities, Statement of Cash Flows, and Statement of Functional Expense (for Voluntary Health and Welfare Organizations Only)
What are the major classifications found on a non-profit's Statement of Financial Position?
Similar to Balance Sheet:
Unrestricted Net Assets
Temporarily Restricted Net Assets
Permanently Restricted Net Assets
What is the measurement focus and basis accounting used for non-profit accounting?
Economic Resources measurement focus so it follows Accrual accounting
Are the assets and liabilities found on a non-profit's Statement of Financial Position listed in order of liquidity?
Who sets aside Unrestricted Net Assets?
The board of trustees
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
What type of restrictions are in place for Temporarily restricted Net Assets?
Time, Use, or Purpose
Will the restrictions on Temporarily Restricted Net Assets eventually lapse?
Yes, after a certain amount of time (or after a specific EVENT has occurred), the temporary restrictions will lapse; thus, creating Unrestricted Net Assets
Can the principal be spent for Restricted Net Assets? Can it be invested?
The principal may never be spent, but it may be invested. (Ex: Endowment)
What is the principal called for Restricted Net Assets?
Are the dividend or interest earnings from Restricted Net Assets also restricted?
Can be restricted or unrestricted (or temporarily restricted) depending on donor's stipulations
Who are the only parties that can restrict the use of assets (in non-profit accounting)?
External parties (donors)
What are the major classifications in a non-profit's Statement of Activities? (Row labels)
Similar to an Income Statement, but also includes Retained Earnings (ala Net Assets):
1) Revenues, Gains, and Other Support
2) Net Assets Released From Restrictions
3) Expenses and Losses - ONLY deducted from Unrestricted Revenues
4) Changes in Net Assets
5) Beginning Net Assets
6) Ending Net Assets
What are the Column headers (labels) on a non-profit's Statement of Activities?
The Net Asset classifications: Unrestricted, Temporarily Restricted, and Permanently Restricted (along with a Total column header)
How are Net assets released from restrictions treated on a non-profit's Statement of Activities?
The amount is reduced in the Temporarily Restricted column and correspondingly increased in the Unrestricted column
On a non-profit's Statement of Activities, all expenses affect what type of Net Asset?
Unrestricted Net Assets
Are any Expenses temporarily or permanently restricted?
No, because in order to spend the money, all restrictions have to have been removed. So they are only found in the Unrestricted column and accordingly deducted from Unrestricted Revenues. (don't forget depreciation!!)
Which revenue classification are expenses deducted from?
Expenses ONLY deducted from Unrestricted Revenues - not Temporary or Permanently Restricted Revenues (Net Assets)
What are the major classifications of expenses for non-profits? Give an example of each.
1) Object (the "What") - Salaries, depreciation
2) Function or Program (the "Why") - health care, fire
3) Character (the "When") - typically for debt service (past), current debt (present), or capital outlays (future)
What are the characteristics of a Statement of Cash Flows for non-profits? What are the major classifications?
Both direct and indirect methods are permitted:
Operating Activities - Unrestricted Revenues and Unrestricted Expenses
Investing Activities - Purchasing of investments or fixed assets
Financing Activities - Endowments and restricted contributions
What revenue types are associated with a non-profit's Operating activities on its Statement of Cash Flows?
Both unrestricted and temporarily restricted revenues
What revenue types are associated with a non-profit's Financing activities on its Statement of Cash Flows?
Permanently restricted revenues (which makes sense, as the principal from debt financing is a financing activity for private for-profit firms)
Proceeds spent on the acquisition of Fixed Assets are what type of activities in a non-profit's Statement of Cash Flows?
Proceeds from contributions restricted for the acquisition of Fixed Assets are what type of activities in a non-profit's Statement of Cash Flows?
Proceeds from contributions for long-term purposes are what type of activities in a non-profit's Statement of Cash Flows?
Proceeds from contributions are usually what type of activities in a non-profit's Statement of Cash Flows?
When are revenues on contributions recognized? What value are they recorded at?
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
Which organizations are required to present a Statement of Functional Expenses?
Volunteer Health and Welfare Organizations (VHWOs)
What are the major categories on a Statement of Functional Expenses?
1) Public support (donation revenue - primary revenue source)
2) Revenues (earned revenues such as from investments, recurring member dues, or client service)
3) Program Expenses (the primary costs of running the program)
4) Support services (think marketing and soliciting of funds)