Private Not-for-Profit Accounting – Flashcards
Unlock all answers in this set
Unlock answersquestion
General characteristics of NFP (3)
answer
1. They receive significant $ contributions for people that do not expect a commensurate (corresponding in size) return. 2. They have an operating mission other than a providing goods and services for profit. 3. They don't have ownership interests as in the profit enterprise.
question
Basic goals framework for PNFP (2)
answer
1. FS should focus on the entity as a whole. 2. Reporting should be similar to Profit, unless there are major differences in the nature of transactions or informational needs for the FS users
question
FS for Private Not-for-Profit
answer
1. Statement of Financial Position (BS) 2. Statement of Activities (IS) (Classified by Net Asset Type) 3. Statement of Cash Flows (SCF) *(4). Statement of Functional Expenses - only for voluntary health and welfare entities. Ex. Public health clinics and homeless shelters.
question
Net Assets Categories (3)
answer
1. Unrestricted 2. Temporarily Restricted 3. Permanently Restricted
question
Unrestricted Net Assets
answer
Assets that can be spent or internally restricted
question
Temporarily Restricted
answer
Restricted by an external party for either (a) particular purpose or (b) use in a future period.
question
Permanently Restricted
answer
Expected to remain restricted for as long as the entity exists. NOTE: Some or all of the income can be used.
question
Statement of Changes in Net Assets (SoA)
answer
Public Support + Revenue ± Net Assets released from restrictions - Expenses ± Gains(Losses)
question
Public Support
answer
Sponsorships + Contributions + Grants
question
Revenue
answer
Investment income + Service Fees
question
Causes of release from restrictions
answer
1. Resource was expended as an expense, designated by the donor 2. Resource was expended as an asset, designated by the donor 3. Time restriction was satisfied
question
Expenses
answer
Program (Education, Health & Sanitation, Nutrition, Emergencies, etc.) Supporting Activities (Fund-raising, Management & General)
question
Non-operating gains(losses)
answer
Realized/Unrealized Gains on Investments, Change in value of trusts, change in accrued benefit liability
question
Program Services Expense Category
answer
Encompass the entity's activity related to its mission.
question
Supporting Services Expense Category
answer
General & Admin; Fundraising
question
Preferable Ratio of Program Services to Total Expenses
answer
>65%
question
Where is Depreciation Expense classified on SoA?
answer
Program Service Expense, Unrestricted Net Assets
question
A = Donor; B = Agent; C = Beneficiary JE for A if A Relinquishes control/Retains control
answer
Relinquish: Expense - Charitable Contribution XXX Cash XXX Retains: Refundable Advance to B XXX Cash XXX
question
A = Donor; B = Agent; C = Beneficiary JE for B if A Relinquishes control/Retains control
answer
Relinquish: Cash XXX Liability to C XXX Retains: Cash XXX Refundable Advance from A XXX
question
A = Donor; B = Agent; C = Beneficiary JE for C if A Relinquishes control/Retains control
answer
C records a JE only when there is certainty that he will receive the gift. Uncertainty is eliminated: Contribution Receivable XXX Net Assets - Contributions XXX
question
2 Criteria for recognizing contributed services (NFP)
answer
1. Creates or enhances a financial asset. 2. Requires a special skill, which otherwise would need to be purchased.
question
Works of Art donations
answer
Disclosure is required, but not recognition.
question
3 Criteria for disclosing works of art
answer
1. Added to the collection 2. Protected/Preserved 3. Covered by an organizational policy, whereby gain from sale will be used to acquire other collection items.
question
A private not-for-profit entity receives two gifts. One is $80,000 and is restricted for paying salaries of teachers who help children learn to read. The other is $110,000, which is restricted for purchasing playground equipment. Both amounts are properly spent by the end of this year. Because the purchase of the playground equipment was made at the end of the year, the organization records no depreciation this period. It has elected to view the equipment as having a time restriction. On the statement of activities, what is reported for unrestricted net assets? Increase and Decrease in what amounts
answer
An increase of $80,000 and a decrease of $80,000. Because of the time restriction, the amount spent for playground equipment remains in temporarily restricted net assets until depreciated
question
A group of high school seniors performs volunteer services for patients at a nearby nursing home. The nursing home would not otherwise provide these services, such as wheeling patients in the park and reading to them. At the minimum wage rate, these services amount to $21,320, but their actual value is estimated to be $27,400. In the nursing home's statement of activities, what amount should be reported as public support?
answer
These volunteer services, although important, do not meet the criteria for recognition. They do not require a specialized skill that would be otherwise purchased. They do not enhance a non-financial asset.
question
A voluntary health and welfare entity sends a mailing to all of its members including those who have donated in the past and others who have never donated. The mailing, which had a total cost of $22,000, asks for monetary contributions to help achieve the charity's stated mission. In addition, 80 percent of the material included in the mailing is educational in nature, providing data about the entity's goals. Which of the following is true?
answer
A. No part of the $22,000 should be reported as a program service cost because there is no specific call to action. B. Some part of the $22,000 should be reported as a program service cost because more than 50 percent of the material was educational in nature. C. No part of the $22,000 should be reported as a program service cost because the mailing was sent to both previous donors and individuals who have not made donations. D. Some part of the $22,000 should be reported as a program service cost because of the educational materials included.
