Accounting for Not-for-Profit Organizations For Non Profit OG.pdf · Not-For-Profit Accounting...
Transcript of Accounting for Not-for-Profit Organizations For Non Profit OG.pdf · Not-For-Profit Accounting...
21 - 1 ©2003 Prentice Hall Business Publishing, Advanced Accounting 8/e, Beams/Anthony/Clement/Lowensohn
Accounting for
Not-for-Profit Organizations
21 - 2 ©2003 Prentice Hall Business Publishing, Advanced Accounting 8/e, Beams/Anthony/Clement/Lowensohn
Learning Objective 1
Learn about the four main
categories of not-for-profit
organizations.
21 - 3 ©2003 Prentice Hall Business Publishing, Advanced Accounting 8/e, Beams/Anthony/Clement/Lowensohn
Categories of Not-For-Profit
Organizations
Voluntary health and welfare organizations
Other not-for-profit entities
Health care entities
Colleges and universities
21 - 4 ©2003 Prentice Hall Business Publishing, Advanced Accounting 8/e, Beams/Anthony/Clement/Lowensohn
The Nature of Not-For-Profit
Organizations
A not-for-profit entity…
(1) receives contributions of resources from
providers who do not expect pecuniary returns,
(2) operates for purposes other than profits,
and (3) does not possess ownership interests
like those of business enterprises.
21 - 5 ©2003 Prentice Hall Business Publishing, Advanced Accounting 8/e, Beams/Anthony/Clement/Lowensohn
Learning Objective 2
Differentiate between governmental
and nongovernmental
not-for-profit organizations.
21 - 6 ©2003 Prentice Hall Business Publishing, Advanced Accounting 8/e, Beams/Anthony/Clement/Lowensohn
Classification of Organizations
Governmental not-for-profit organizations
Nongovernmental not-for-profit
organizations
21 - 7 ©2003 Prentice Hall Business Publishing, Advanced Accounting 8/e, Beams/Anthony/Clement/Lowensohn
Governmental Not-For-Profit
Organizations
Officers are elected by popular vote or
appointment by a state or local government.
Governments can unilaterally dissolve the entity.
The entity has the power to enact
and enforce a tax levy.
They are special-purpose governments.
21 - 8 ©2003 Prentice Hall Business Publishing, Advanced Accounting 8/e, Beams/Anthony/Clement/Lowensohn
Governmental Not-For-Profit
Organizations
GASB Statements No. 34 and No. 35
require special purpose governments
with more than one governmental
program or both governmental
and business-type activities to
present both government-wide
and fund financial statements.
21 - 9 ©2003 Prentice Hall Business Publishing, Advanced Accounting 8/e, Beams/Anthony/Clement/Lowensohn
Nongovernmental Not-For-Profit
Organizations
These are NFP organizations that
lack the governmental element:
Voluntary health and welfare organizations
Colleges and universities
Other
Health care organizations
21 - 10 ©2003 Prentice Hall Business Publishing, Advanced Accounting 8/e, Beams/Anthony/Clement/Lowensohn
Learning Objective 3
Identify the accounting principles
applicable to governmental and
nongovernmental not-for-profit
organizations.
21 - 11 ©2003 Prentice Hall Business Publishing, Advanced Accounting 8/e, Beams/Anthony/Clement/Lowensohn
Not-For-Profit Accounting Principles
FASB Statements No. 116 and 117
are applicable to all nongovernmental
not-for-profit entities.
FASB Statements No. 124 and 135
are specifically related to
not-for-profit organizations.
21 - 12 ©2003 Prentice Hall Business Publishing, Advanced Accounting 8/e, Beams/Anthony/Clement/Lowensohn
Financial Statements
FASB Statement No. 117 requires
that all NFP entities provide:
Statement of Financial Position
Statement of Activities
Statement of Cash Flows
21 - 13 ©2003 Prentice Hall Business Publishing, Advanced Accounting 8/e, Beams/Anthony/Clement/Lowensohn
Classification of Net Assets
Three Classes of Net Assets
Unrestricted Temporarily Restricted
Permanently Restricted
21 - 14 ©2003 Prentice Hall Business Publishing, Advanced Accounting 8/e, Beams/Anthony/Clement/Lowensohn
Statement of Financial Position
The statement reports assets,
liabilities, and net assets.
Comparative statements from
the prior period are not required.
21 - 15 ©2003 Prentice Hall Business Publishing, Advanced Accounting 8/e, Beams/Anthony/Clement/Lowensohn
Statement of Activities
This provides information
about the change in amount
and nature of net assets.
The focus of accounting is
the organization as a whole.
21 - 16 ©2003 Prentice Hall Business Publishing, Advanced Accounting 8/e, Beams/Anthony/Clement/Lowensohn
Statement of Activities
It reports increases in unrestricted
net assets as revenues and...
reports decreases in unrestricted
net assets as expenses.
Temporarily restricted or permanently
restricted net assets consist of
donor- restricted contributions.
21 - 17 ©2003 Prentice Hall Business Publishing, Advanced Accounting 8/e, Beams/Anthony/Clement/Lowensohn
Statement of Activities
Generally, an organization reports
revenues and expenses at gross amounts.
Peripheral gains and losses
are reported at net amounts.
Optional classifications
Operating or nonoperating
Recurring or nonrecurring
21 - 18 ©2003 Prentice Hall Business Publishing, Advanced Accounting 8/e, Beams/Anthony/Clement/Lowensohn
Statement of Functional Expenses
Voluntary health and welfare organizations
must report expenses classified by
function and by natural classification.
This statement is not required for ONPOs.
21 - 19 ©2003 Prentice Hall Business Publishing, Advanced Accounting 8/e, Beams/Anthony/Clement/Lowensohn
Statement of Cash Flows
Statement No. 117 extends the
provisions of FASB Statement No. 95
to not-for-profit organizations.
Statement No. 117 encourages
NFP organizations to use
the direct method.
21 - 20 ©2003 Prentice Hall Business Publishing, Advanced Accounting 8/e, Beams/Anthony/Clement/Lowensohn
Contributions
Statement No. 116 defines a contribution
as “an unconditional transfer of cash
or other assets...in a voluntary,
nonreciprocal transfer...”
A promise to give is a written or oral
agreement to contribute cash or
other assets to another entity.
21 - 21 ©2003 Prentice Hall Business Publishing, Advanced Accounting 8/e, Beams/Anthony/Clement/Lowensohn
Donor-Imposed Restrictions
It provides that the donor’s money be
returned or the donor is released from
the promise to give if the condition is not met.
21 - 22 ©2003 Prentice Hall Business Publishing, Advanced Accounting 8/e, Beams/Anthony/Clement/Lowensohn
Gifts of Long-Lived Assets
Unrestricted
Restricted
21 - 23 ©2003 Prentice Hall Business Publishing, Advanced Accounting 8/e, Beams/Anthony/Clement/Lowensohn
Investments and Investment Income
Investments are initially recorded at cost.
Contributed securities are
recorded at their fair market value.
Investment income is recognized as earned.
21 - 24 ©2003 Prentice Hall Business Publishing, Advanced Accounting 8/e, Beams/Anthony/Clement/Lowensohn
Transactions
Exchange Transactions
Agency Transactions
Gifts in Kind
21 - 25 ©2003 Prentice Hall Business Publishing, Advanced Accounting 8/e, Beams/Anthony/Clement/Lowensohn
Learning Objective 4
Introduce FASB not-for-profit
accounting principles.
21 - 26 ©2003 Prentice Hall Business Publishing, Advanced Accounting 8/e, Beams/Anthony/Clement/Lowensohn
Measurement Principles
NFP organizations measure
contributions at fair value.
If the fair value of the contributed asset decreases
significantly between the pledge date and the
date the asset is received, the difference is
recognized in the period the decrease occurred.
21 - 27 ©2003 Prentice Hall Business Publishing, Advanced Accounting 8/e, Beams/Anthony/Clement/Lowensohn
Collections
Statement No. 116 encourages retroactive
capitalization of collections of works of art.
If collections are capitalized, they are
recognized as revenues or gains.
21 - 28 ©2003 Prentice Hall Business Publishing, Advanced Accounting 8/e, Beams/Anthony/Clement/Lowensohn
Fund Accounting
Many not-for-profit organizations continue to
use fund accounting for internal accounting.
21 - 29 ©2003 Prentice Hall Business Publishing, Advanced Accounting 8/e, Beams/Anthony/Clement/Lowensohn
Learning Objective 5
Apply not-for-profit accounting
principles to voluntary health
and welfare organizations.
21 - 30 ©2003 Prentice Hall Business Publishing, Advanced Accounting 8/e, Beams/Anthony/Clement/Lowensohn
Voluntary Health and Welfare
Organizations
VHWOs are supported by and provide
voluntary services to the public.
March of Dimes
Girl Scouts
American Cancer Society
Meals on Wheels Boy Scouts
21 - 31 ©2003 Prentice Hall Business Publishing, Advanced Accounting 8/e, Beams/Anthony/Clement/Lowensohn
Accounting for Voluntary Health
and Welfare Organizations
In 2005, Neighbors Helping Neighbors (NHN)
distributed decals to all residents in the community.
The decals cost NHN $145.
The organization received unrestricted cash
contributions of $4,000 and unconditional
pledges of $6,000 ($2,000 collectible in 2006).
21 - 32 ©2003 Prentice Hall Business Publishing, Advanced Accounting 8/e, Beams/Anthony/Clement/Lowensohn
Accounting for Voluntary Health
and Welfare Organizations
Cash 4,000
Unrestricted Support –
Contributions 4,000
To record cash contributions
Expenses – Supporting Services 145
Cash 145
To record payment of decals
21 - 33 ©2003 Prentice Hall Business Publishing, Advanced Accounting 8/e, Beams/Anthony/Clement/Lowensohn
Accounting for Voluntary Health
and Welfare Organizations
Contributions Receivable 6,000
Allowance for
Uncollectible Contributions 600
Unrestricted Support –
Contributions 3,600
Temporarily Restricted
Support – Contributions 1,800
To record unrestricted promises to give, promises restricted
for use in 2006, and estimated uncollectibles
21 - 34 ©2003 Prentice Hall Business Publishing, Advanced Accounting 8/e, Beams/Anthony/Clement/Lowensohn
Accounting for Voluntary Health
and Welfare Organizations
On January 1, 2005, Martin Construction
donated a used van to the organization.
The FMV of the van is $1,500.
The van has a three-year remaining useful life.
21 - 35 ©2003 Prentice Hall Business Publishing, Advanced Accounting 8/e, Beams/Anthony/Clement/Lowensohn
Accounting for Voluntary Health
and Welfare Organizations
Equipment 1,500
Temporarily Restricted
Support – Contributions 1,500
To record receipt of donated van
Depreciation Expense – Program
Services – Community Service 500
Accumulated Depreciation 500
To record depreciation
21 - 36 ©2003 Prentice Hall Business Publishing, Advanced Accounting 8/e, Beams/Anthony/Clement/Lowensohn
Accounting for Voluntary Health
and Welfare Organizations
Temporarily Restricted
Net Assets – Reclassification Out 500
Unrestricted Net Assets –
Reclassification In 500
To record reclassification of net assets for which
the temporary restriction is satisfied
21 - 37 ©2003 Prentice Hall Business Publishing, Advanced Accounting 8/e, Beams/Anthony/Clement/Lowensohn
Accounting for Voluntary Health
and Welfare Organizations
A fund-raising banquet was held.
Sales were $950 and related
expenses amounted to $650.
What are the journal entries?
21 - 38 ©2003 Prentice Hall Business Publishing, Advanced Accounting 8/e, Beams/Anthony/Clement/Lowensohn
Accounting for Voluntary Health
and Welfare Organizations
Cash 950
Unrestricted Gains – Special Event 950
To record proceeds from a fund-raising event
Unrestricted Gains – Special Event 650
Cash 650
To charge costs of fund-raising event against
support from the event
21 - 39 ©2003 Prentice Hall Business Publishing, Advanced Accounting 8/e, Beams/Anthony/Clement/Lowensohn
Other Issues
Gifts in kind
Membership fees
Donated securities and investment income
21 - 40 ©2003 Prentice Hall Business Publishing, Advanced Accounting 8/e, Beams/Anthony/Clement/Lowensohn
Other Issues
Donated services and payment of salaries
Depreciation
Fixed assets purchased with restricted resources
21 - 41 ©2003 Prentice Hall Business Publishing, Advanced Accounting 8/e, Beams/Anthony/Clement/Lowensohn
Other Not-For-Profit Organizations
Cemetery associations Social organizations
Civic organizations
Libraries
Museums
Political organizations
Religious organizations
21 - 42 ©2003 Prentice Hall Business Publishing, Advanced Accounting 8/e, Beams/Anthony/Clement/Lowensohn
Learning Objective 6
Apply not-for-profit accounting
principles to hospitals and other
health care organizations.
21 - 43 ©2003 Prentice Hall Business Publishing, Advanced Accounting 8/e, Beams/Anthony/Clement/Lowensohn
Accounting for a Nongovernmental
Not-For-Profit Hospital
Patient service revenue
Premium fees
Other operating revenues
21 - 44 ©2003 Prentice Hall Business Publishing, Advanced Accounting 8/e, Beams/Anthony/Clement/Lowensohn
Patient Service Revenues
Daily patient service
(room, board, general nursing)
Nursing services
(O/R, recovery room)
Other professional services
21 - 45 ©2003 Prentice Hall Business Publishing, Advanced Accounting 8/e, Beams/Anthony/Clement/Lowensohn
Patient Service Revenues
Courtesy allowances
Contractual adjustments
21 - 46 ©2003 Prentice Hall Business Publishing, Advanced Accounting 8/e, Beams/Anthony/Clement/Lowensohn
Statement of Operations and Other
Hospital Financial Statements
Balance Sheet
Statement of Operations
Statement of Changes in Net Assets
Statement of Cash Flows
21 - 47 ©2003 Prentice Hall Business Publishing, Advanced Accounting 8/e, Beams/Anthony/Clement/Lowensohn
Learning Objective 7
Apply not-for-profit accounting
principles to private not-for-profit
colleges and universities.
21 - 48 ©2003 Prentice Hall Business Publishing, Advanced Accounting 8/e, Beams/Anthony/Clement/Lowensohn
Private Not-for-Profit Colleges
and Universities
Nongovernment not-for-profit
colleges and universities
apply the requirements of
SFASs 116 and 117.
21 - 49 ©2003 Prentice Hall Business Publishing, Advanced Accounting 8/e, Beams/Anthony/Clement/Lowensohn
Accounting for a Private
Not-For-Profit College or University
Tuition and fees
Appropriations from federal,
state, and local governments
Contributions
Student financial aid
Endowments
Sales and services
21 - 50 ©2003 Prentice Hall Business Publishing, Advanced Accounting 8/e, Beams/Anthony/Clement/Lowensohn
Expenses
Instruction
Research
Academic support
Public service
21 - 51 ©2003 Prentice Hall Business Publishing, Advanced Accounting 8/e, Beams/Anthony/Clement/Lowensohn
Expenses
Student services
Institutional support
Operation and maintenance of plant
Student aid
21 - 52 ©2003 Prentice Hall Business Publishing, Advanced Accounting 8/e, Beams/Anthony/Clement/Lowensohn
Financial Statements
Statement of Financial Position
Statement of Activities
Statement of Cash Flows
21 - 53 ©2003 Prentice Hall Business Publishing, Advanced Accounting 8/e, Beams/Anthony/Clement/Lowensohn
End