LEADSTAR COLLEGE OF MANAGEMENT AND LEADERSHIP

FACULTY OF BUSINESS AND LEADERSHIP

GRADUATE DEPARTMENT OF BUSINESS ADMINISTRATION

Fund and Non-Profit Accounting Assignment

BY ABEBA KIROS YALOW
ID NO. _________

Nov, 2018
HUMERA, ETHIOPIA

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 1. Explain what distinguishes governmental not for profit organizations from nongovernmental not for
profit organizations.
Answer
A not for profit organization is one wherein the income or funds received are channeled back to the operations
of the organization as expenses. A non-governmental organization is a group that is engaged in helping people
against poverty alleviation or providing livelihood. Both groups do not distribute its income to its officers and
members

NGOs can be any non-governmental entity, whether a for-profit corporation, like Bechtel, or a nonprofit
entity, like most religious organizations and charities. The term just distinguishes between "private"
organizations and government agencies like USAID, the Peace Corps, etc.

not too much, both are usually independent service's but a not for profit organization may have been
chartered by a government program and the other strictly private.

 Power ultimately rests in the hands of the people

 People delegate power to public officials through the election process
 Empowered by and accountable to a higher level government
 Taxation powers

Everyone, it seems, has a cause. Provide disaster relief, sustainable living, bring healthcare to the less fortunate,
raise literacy rates. These are all noble endeavors, and while you may never go on to form a non-profit or Non-
Governmental Organization (NGO) like The Bill and Melinda Gates Foundation, The International Red Cross,
or The Salvation Army, the call to do something good and selflessness stirs a desire to help.

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NGOs perform many duties:

 Community health promotion and education (such as hygiene and waste disposal).
 Managing emerging health crises (HIV/AIDS, Hepatitis B).
 Community social problems (juvenile crimes, run-aways, street children, prostitution).
 Environmental (sustainable water and energy resources).
 Economic (micro loans, skills training, financial education and consulting).
 Development (school and infrastructure construction).
 Women’s issues (women’s and children’s rights, counseling, literacy issues).
What is a Non-Profit?

The Cornell University Law School define a non-profit as: “… a group organized for purposes other than
generating profit and in which no part of the organization’s income is distributed to its members, directors, or
officers.” While there are many types of charitable or nonprofit organizations, the most common is a Section
501(c) (3) organization, according to the U.S. Internal Revenue Service. This type of organization usually
fulfills purposes that are:

 Religious,
 Charitable,
 Scientific,
 Public safety,
 Literary,
 Educational,
 Fostering national or international amateur sporting,
 or Preventing cruelty to children or animals,
 but all on a much smaller scale.

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The Biggest Difference between the Two Organization Types
The biggest difference with an NGO is the scope of work that most non-profits assume. Many non-profits are
affiliated with churches, boys and girls clubs, and alumni associations. An NGO, on the other hand, has broader
and internationally driven footprint, often working in isolated and far flung climates of lawlessness, widespread
famine and disease, military bases, and large scale disaster such as hurricane relief.
DifferenceBetween.net summarizes the differences between a non-profit and an NGO as:

 An NGO’s funds may be raised by the government, but it maintains a non-governmental position, with no
need for government representation. They are also known as civil society organizations.
 A non-profit organization uses its extra funds for the purpose of the organization, rather than dividing it
between the shareholders and the owners of the organization. Examples of non-profits are public arts
organizations, trade unions and charitable organizations.

2. Identify and explain the characteristics that distinguish governmental and not for profit entities from
business entities.

Answer

Resource providers do not expect to receive proportional benefits

Lack of a profit motive

Absence of transferable

ownership rights

3. GASB and FASB standards are concerned with external financial reporting whereas FASAB standards
are concerned with both internal and external financial reporting. do you agree with this statements?
why or why not?

Answer
YES, I Agree,

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 The Financial Accounting Standards Board and Governmental Accounting Standards Board share more
similarities than differences. Both are composed of a seven-member board of directors, both are
nongovernmental agencies and both share a similar mission centering on accounting and financial reporting
standards. Despite these similarities, however, their focus and effects on the statement of cash flows is
significantly different. To start with, the FASB focuses on public and some privately-held businesses, while
the focus of the GASB is on state and local governmental agencies.

Financial Accounting Standards Board

The FASB creates standards for private entities in the United States, and generally accepted accounting
principles form the basis for a company’s financial statements. Methods for recording inventory, payables,
receivables and other specific line items are all contained within GAAP. The standard-setting process includes a
board and peer review of proposed standards, which puts accounting treatments under scrutiny before they are
added to the Accounting Standards Codification. Changes to existing standards go through a similar review
process

Governmental Accounting Standards Board

The GASB creates standards for governmental entities in a similar manner. Proposed standards go through a
rigorous review process before they are codified. Entities that follow these standards include local and state
governments, regulatory agencies and the federal government. GASB financial statements are prepared using
the modified accrual form of accounting, which differs from FASB accrual or cash basis accounting. Modified
accrual accounting is a combination of accrual and cash basis accounting. Revenues are recorded when
measurable and available, while expenditures are recorded using the full accrual basis

The Federal Accounting Standards Advisory Board (FASAB) is an advisory committee that develops
accounting standards for U.S. government agencies. The FASAB is designed to improve government
accountability by issuing federal financial accounting and reporting standards that adhere to industry best
practices.

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The FASAB includes nine members that consists of three federal representatives and six public non-federal
members. According to its mission statement, the FASAB:

 Considers the costs and the benefits of financial information prepared in conformity with generally accepted
accounting standards.

 Ensures participation by a variety of stakeholders throughout the federal accounting standards-setting

process.

 Provides accounting standards implementation guidance through both formal and informal communication
with preparers and auditors.

 Develops accountability through transparent, consistent government practices that adhere to the
memorandum of understanding in use among its sponsors.

The FASAB follows an open process for considering federal accounting standards that includes the following
steps:

1. Identification of accounting issues and agenda decisions.

2. Preliminary deliberations.

3. Preparation of initial documents.

4. Release of the documents to the public for comment, as well as public hearings when necessary.

5. Further deliberations to consider comments.

6. Approval by at least a two-thirds majority affirmative vote.

7. Submit a proposed statement to principals for review.

8. Publication of final statement or interpretation.

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After the FASAB concludes deliberations and submits the proposal to sponsors, the sponsors have 90 days to
review it. Following this period, if neither the director of the Office of Management and Budget or the
Comptroller General object to the proposal, it is published by the FASAB and becomes generally accepted
accounting principles for federal financial reporting entities.

4.In March 2014, a local not-for –profit organization received a pledge from a donor for $10,000; the donor
promised to pay the money to the organization in September 2014, to be used in providing reading programs for
underprivileged children. The donor gave money to the organization in September 2014, and it was spent for
reading programs in the first half of 2015. When should the revenue associated with this contribution be
recognized?

Answer

The organization recognized the money as Revenue at September 2014. Because to record as revenue must be
presented the money unless in promise it is impossible to recognized as revenue.

5.city XYZ received $4,000,000 from one of its most prominent citizens during the year ended June 30,2009.
The donor stipulated that the $4,000,000 be invested permanently, and that interest and dividends earned on the
investments be used to support the homeless people of city XYZ. During the year ended June 30,2014,
dividends received from stock investments amounted to $4,000,000.At June 30,2014, $10,000 of interest was
earned, but it will not be received until July of 2014. The fair value of the securities in which the $4,000,000
was invested had increased $8,000 by June 30, 2014. For the year ended June 30,2014, what amount should the
trust fund report as investment earnings on the statement of revenues, expenses, and changes in fund balance?

Answer

78,000

6. During 2013, an alumnus of QPR university donated $10,000,000 to the school with the understanding that
the principal (the original $10,000,000) may never be spent. However, the earnings from the principal may be
spent at any time in many manners the school chooses. During 2013, the donation earned $1,000,000, none of
which has spent. For reporting purpose in 2013, how much should QPR report?

Answer
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The $10,000,000 is permanently restricted because it may never be spent. The $1,000,000 of earnings is not
restricted as to time period but is restricted as to purpose, so it is classified as temporarily restricted. So the
university reporting nine million.

7. In the current month, a private not for profit hospital performed medical services for patients worth $660,000.
The hospital expects the amount ultimately collected to be $460,000. The $200,000 difference is comprised of:
contractual adjustmentwith third party payers of $110,000; estimated uncollectible accounts of $60,000; and
charity care of $30,000. How much net patient service revenue should be reported for the month?

Answer

Net patient revenue does not include charity care and contractual adjustments ($660,000 - $30,000 - $110,000 =
$520,000). Uncollectible accounts are recorded as an expense not a contra revenue. Although charity care is not
included in revenues, the amount of charity care must be disclosed, so the hospital has to keep records related to
charity care.

8.ABC city establishedan internal service fund for its data processing activities on July 1, 2013. During the
fiscal year ended June 30,2014, the following transactions and events occurred:

1. On July 1,2013, the city council authorized the general fund to contribute $1,000,000 to help establish the
internal service fund on July 20,2013.

2. The internal service fund spent $900,000 of the contribution to acquire a mainframe computer on July
25,2013.

3. During the year ended June 30,2014, the internal service billed other funds of the city $300,000 for the use of
the computer. By year end, all of the billings were collected except for $30,000.

4. The internal service fund incurred general operating expenses of $100,000, exclusive of depreciation, during
the year ended June 30, 2014. All of the expenses were paid by June 30, 2014, except for $24,000.

5.Depreciation expense related to the computer was $180,000.

Required:

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A. Prepare all Journal entries

Answer

1. Cash -------------------------------- 1,000,000

Transfer in from General Fund ------------ 1,000,000

2. Computer Equipment ------------ 900,000

Cash ------------------------------ 900,000

3. Due from other funds -------------- 300,000

Charges for services ---------------- 300,000

Cash --------------------------- 270,000

Due from other funds -------------- 270,000

4. General operating Expenses ------------ 100,000

Voucher payable ----------------------- 100,000

Voucher payable------------------------- 76,000

Cash --------------------------------------- 76,000

5. Depreciation Expenses ---------------------- 180,000

Accumulated depreciation --------------------------------180,000

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 B. Prepare a statement of revenues, expenses, and changes in fund net assets for the internal service
fund for the year ended June 30,2014.

Answer

City of ABC

Data Processing Internal Service Fund

Statements of Revenues, Expenses, And Changes in Fund Net Assets

For the year Ended June 30, 2009

Operating Revenues:

Changes for service ------------------------------------ 300,000

Operating Expenses:

General operating ------------------------ 100,000

Depreciation ----------------------------- 180,000

Total operating Expenses -------------------------------280,000

Net Income Before Transfer------------------------------------------- 20,000

Transfer in from general Fund --------------------------------------- 1,000,000

Net Assets, June 30,2009------------------------------------------------ 1,020,000

C.Calculate the amount of unrestricted net assets at June30,2014.

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Answer

Unrestricted Net Assets:

Net Assets June 30,2009 --------------------------------- 1,020,000

Invested in Capital Assets (900,000-180,000) --------- 720,000

$ 300,000

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 Bibliography

 Encyclopedia
 www.fund accounting
 World NGOS 17th Edition

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