Accounting For Non-Profit Organizations

Saint Louis University
School of Accountancy and Business Management

Mary Height Campus, Baguio City
Accounting for Non- Profit Organizations

(Outline of research with BBCCC Financial
Statements Attached)
Accounting 303 MWF 2:30-3:30 D801
ACCOUNTING FOR NON-PROFIT ORGANIZATION
This chapter will focus upon for four types of not-for-profit / service organizations, namely:
1. The professional organization
2. The privately organized education institutions – school, college, university
3. The private organized hospital; and
Accounting For Non Profit organizations – Page 1 of 41

Group 10
4. The cooperative
What is a non-profit organization?

A non-profit organization is an entity that is operated for the benefit of society as a whole
rather than for the benefit of an individual proprietor or a group of partners or shareholders. A
non-profit organization strives only to obtain revenue sufficient to cover its expenses. Thus,
the concept of income is not meaningful.
Non-profit organizations constitute a significant segment of our society.
Some examples are:
1. Voluntary health and welfare organizations:

2. Schools, colleges and universities
3. Hospitals
4. Cooperatives
5. Labor unions
6. Performing arts organizations
7. Foundations
8. Religious organizations
9. Country Clubs
10. Professional associations
Purpose of Financial Statements

The primary purpose of financial statements is to provide relevant information to meet the
common interests of donors, members, creditors and others who provide resources to not-for-
profit organizations. Those external users of financial statements have common interests in
assessing
a. The services an organization provides and its ability to continue to provide those
services and
b. How managers discharge their stewardship responsibilities and other aspects of their
performance.
More specifically, the purpose of financial statements, including accompanying notes, is to
provide information about:
a. The amount and nature of an organization’s assets, liabilities and net assets
b. The effects of transactions and other events and circumstances that change the
amount and nature of net assets
c. The amount and kinds of inflows and outflows of economic resources during a period
and the relation between inflow and outflow
d. How an organization obtains and spends cash, its borrowing and repayment of
borrowing and other factors that may affects its liquidity
e. The service efforts of an organization

Group 10
STATEMENT OF FINANCIAL POSITION
This statement provides relevant information about the liquidity, financial flexibility
and interrelationship of an organization’s asset and liabilities in order to let the external users
of such be able to assess the organization’s ability to continue providing the services, to meet
obligations, and needs for external financing.
Information about the nature and amounts of different types of permanent restrictions or
temporary restrictions shall be provided either by reporting their amounts on the face of the
statement or by including relevant details in notes to financial statements. Separate line items
maybe reported within permanent restrictions for holding of :
a. assets, such as land or works of art, donated with stipulations that they be used for a
specified purpose, be preserved and not be sold or;
b. assets donated with stipulations that they be invested to provide permanent source of
income such as gifts that create permanent endowment funds.
Separate line items may be reported within temporarily restricted net assets or in notes to
financial statements to distinguish between temporary restrictions for:
a. support of particular operating activities,
b. investment for a specified terms,
c. use in specified future period, or
d. acquisition of long-lived assets. Donors’ temporary restrictions may require that

resources be used for specified purpose as purpose restrictions or both. Gifts called
term endowments such as gifts of cash or other assets with stipulation that they be
invested to provide source of income for a specified term and that the income be used
for a specified purpose are both time and purpose restricted.
STATEMENTS OF ACTIVITIES
This statement shows the revenues, gains, expenses and losses. The primary purpose of
this statement is to provide relevant information about:
a. the effects of transactions and other events and circumstances that change the
amount and nature of net asset,
b. the relationships of those transactions and other events and circumstances to each
other, and
c. how the organization’s resources are used in providing various programs or services.
The information in this statement used with related disclosures and information in other
financial statements, helps donors, creditors and others to
a. evaluate the organizations performance during a period,
b. assess an organization’s service efforts and its ability to continue provide services, and

Group 10
c. assess how an organization’s managers have discharged their stewardship
responsibilities and other aspects of their performance. This statement use the
descriptive term - change in net assets or change in equity of the entity as a whole.
STATEMENT OF CASH FLOW
This statement provides relevant information about the cash receipts and cash payments
of an organization during a period. Although this statement may be using either of the two
methods, direct and indirect, only the direct method is illustrated below.
PROFESSIONAL ORGANIZATION
There are more than 40 professional organizations accredited by the Professional

Regulation Commission. These associations or institutions have their head offices in Metro
Manila, but their chapters are found all over the country. Their operations are generally
financed by membership dues that are paid annually. Sharing of these membership fees
among the different chapters, regional councils and head office are provided for in their by-
laws. Bigger organizations have established regional councils which oversee the chapters.
Each organization has its own mission and vision and its activities shall be towards the
attainment of these goals.
Their operations are characterized by having a board of directors establishing the policies
and guidelines based in the by-laws whish are implemented by means of a set of officers
elected from among the members of the board. Every year elections are conducted
nationwide. Various committees are created with a chairman and members who give their
time and effort voluntarily to achieve the objectives of the organizations. Full accrual basis is
used whenever practicable, depreciation is provided but is not considered in determining the
excess of receipts over disbursements. Two kinds of net assets are commonly accounted for,
unrestricted or general and restricted or special net assets. The spreadsheet is used to
summarize daily transactions in these two types of assets. An updated list of members is a
requirement for the sure accounting of annual dues in arrears to support the receivable
accounts. Collections are normally done by the chapters and monthly reports are prepared to
account for the remittances due to the head office and the regional councils. Restricted net
asset are created every time collections would include receipts for subscription to the periodic
journal or for the additions or betterment of the building.
EDUCATIONAL INSTITUTIONS
The activities of an educational institution may be classified as :
a. Instructional - include both resident and extension instruction, public service,

organized researched and the operation of libraries.
b. Administrative - auxiliary include staffing and promotion, registration and enrollment,

operation of the business office, and operation and maintenance of the educational
plant

Group 10
c. Auxiliary services include the operation of the residence halls, dining rooms, college
unions and bookstores, health centers, and athletic and cultural programs.
Revenues in support of these different activities are provided by such varied sources as
contributions, government appropriations, student fees, endowment income, and revenues
from the sale of goods and services.
There are six major fund groupings for educational institutions, namely:
1. Current funds
2. Loan funds
3. Endowment and other nonexpendable funds
4. Annuity funds
5. Plant funds, divided into unexpended plant funds, retirement of indebtedness funds
and an investment in plant section
6. Agency fund
Explain the accounting for non-profit organizations.
Accounting for non-profit organizations is essentially “fund accounting”. This means that
the internal accounting for many non-profit organizations is the fund which is an accounting
entity with a self-balancing set of accounts recording cash and other financial resources
together with related liabilities and changes therein. Accounting is based on FASB SFAS 116,
SFAS 117, SFAS 124 and AICPA Audit and Accounting Guide for health care
organizations.
Funds commonly used by non-profit organizations include the following:
1. Unrestricted fund
2. Restricted fund
3. Endowment funds
4. Agency fund
5. Annuity fund and life income fund
6. Loan fund
7. Plant fund
Unrestricted Fund/ General Fund/ Current Fund
This is also known as the general fun which includes all the assets of a non-profit organization
that are available for use as authorized by the governing board and are not restricted for
specific purposes. The revenue and gains of unrestricted funds are derived from a number of
sources. It is used in fund accounting.
Restricted Fund/ Restricted Current Fund/ General Fund

Group 10
These are the receipts of resources that are to be used in special activities such as publication
of a periodic journal or construction of a building for the unit.
Accounting for cash contributions or donations
Cash contributions or donations are reported as revenue in the year received even though
there are donor-imposed uses or time restrictions on the donation. The entry for the cash
contribution or donation is:
Cash xxx
Contributions revenue xxx
If the donor imposes use or time restriction, the cash contribution or donation is reported as
“temporary restricted revenue” on the statement of activities.
Accounting for “contributed materials”
• recorded at fair value i.e. if a hospital receives free drugs or a university receives free
operating supplies, the entry is
Inventory xxx
Accounting for “contributed services”
Contributed services are recognized in the statement of activities if either of the following
conditions is met:
a. The services create or enhance a non financial asset.
b. The services require specialized skills, are provided by individuals possessing those
skills and would typically need to be purchase if not provided by donations.
Contributed services rendered by skilled individuals are recognized at the going rate for
comparable employees or contractors of the entity less any meals or other living costs
absorbed by the nonprofit organization.
To increase expense and increase unrestricted revenue, contributed services is recorded as

follows:
Salaries expense xxx

Accounting for Contributed facilities

Group 10
Contributed facilities are recognized at fair value either to an asset or expense account. For
example, if a university receives a new building from a generous benefactor to be used as
one of its colleges, the entry is:
Building xxx
Another example, a building is used by a university on a rental basis. However, the owner
waives rental payment. This is recorded at the fair value of the rental as follows:
Rental expense xxx

Classifications of Expense of a nonprofit Organization
1. Program services – these are the organizations activities that result in the
distribution of goods and services to beneficiaries, customers or members that fulfill
the purposes or mission of the organization.
2. Supporting Services – these are other expenses that include all activities of the
organization other than program services, i.e. management and general expenses,
fund raising and membership development activities.
All expense of a non profit organization is reported as unrestricted in the statement of

activities. This means that expenses are deducted only from unrestricted revenue.
What is a restricted fund?
This is used to account for assets available for current use but expandable only as
authorized by the donor of the assets. The donor may impose either “use” restriction or
“time restriction” or both. Assets of the restricted fund are not derived from the
operations of the nonprofit organization.
Explain endowment of fund.
A “permanent endowment fund” is one for which the principal must be maintained
indefinitely in revenue producing investment. Only the revenue from the investments may
be expended. A permanent endowment fund is also known as “regular endowment”. A
permanent endowment fund or “permanently restricted” but the revenue from the fund is
“temporarily restricted”.
A term “endowment fund” is one for which the principal may be expended after the passage
of certain period or the occurrence of an event specified by the donor. The term is
“temporarily restricted”.
A “quasi-endowment fund” is a fund established by the governing board of the nonprofit

organization. At the option of the board, the principal may later be expended.
Accordingly, a quasi-endowment fund is included on “unrestricted net assets” because this is

established using unrestricted net assets.

Group 10
Agency Fund
• Used to account for assets held by the nonprofit organization as custodian.
• Example: A university may act as custodian of cash of a student organization. The

university disburses cash as directed by the officers of the student organization.
• Undistributed cash of the student organizations is reported as liability of the

university's agency fund because the university has no equity in the fund.
Annuity Fund
• Established when assets are contributed to the nonprofit organization with the
stipulation that the organization shall pay specified fixed amount to a designated
beneficiary periodically during a specified period of time.
• At the end of the specified period for the specified payments, the unexpended assets
of the annuity fund are transferred to the unrestricted fund, restricted fund or
endowment fund as instructed by the donor.
Life income Fund
• Used to account for stipulated payments to a named beneficiary during the

beneficiary’s lifetime.
• Only the income on the fund is paid to the beneficiary’s payment from a life income
fund varies form period to period comparing to annuity fund that is fixed.
Loan Fund
• Established by colleges and university for the purpose of granting loans to students to
satisfy their school needs.
• Students loans funds are generally revolving – as old loans are repaid, new loans are
made for the receipts.
Plant Fund
• established for land, building, and equipment
• It may also include cash and investments earmarked for additions to plant or payments
of liabilities collateralized by the plant assets.
• Sinking fund assets set aside for retirement of debt incurred to acquire plant assets is
also included.
Components of Financial Statements of Non-Profit Organizations
1. Statement of Financial Position – reports that “ assets should equal liabilities and
net assets”

Group 10
2. Statement of Activities – reports the “changes in net assets” and their revenue,
gains, expenses and losses. This is equivalent to income statement in commercial
accounting.
- It reports gross amount of revenue and expenses, except that investment revenue
may be reported net of expenses, and gains and losses on disposals of plant assets
may be reported net.
- It reports expenses by functional classification such as program services and

supporting services.
3. Statement of Cash Flows
4. Notes to Financial Statements
5. Statement of Functional Expenses – required only to voluntary health and welfare

organizations – this reports expenses both by function (program and supporting ) and
natural classification (salaries, depreciation etc. )
Classifications of Net Assets
• reported in the statement of Financial Position
1. Unrestricted net assets – assets in the “unrestricted fund”.
2. Temporarily restricted net asset – assets in the restricted fund, loan fund, term
endowment fund, annuity fund, life income fund and plant fund.
3. Permanently restricted net assets – “permanently endowment fund”
Unconditional Promises Treatment
• Reported in the period pledges are made not in the period of cash collection.
• Contribution will not be received until next year, the contribution will be reported as
increase in temporarily restricted net assets for the current year because of
time restriction.
• Conditional promise to give is considered unconditional if the possibility that the

condition will not be met is remote.
Treatment of Re classifications of Net assets
Example: In prior year, a benefactor made a contribution to a private nonprofit university with
the stipulation that the donation be used for faculty travel during the current year.
• This contribution is reported under temporarily restricted net assets in the prior year.
• When the contribution is used for faculty travel in the current year, it is reported as
“reclassification” in the current year's statement of activities. Re-classifications are
reported in the statement of activities as “net assets released from restrictions”.

Group 10
• This reclassification is reported in the current year as negative amount for temporarily
restricted net assets and positive amount for restricted net assets.
• The travel expense is reported in the current year's statement of activities as

deduction from unrestricted net assets. All expenses are decrease in unrestricted net
assets.
• The use of the contribution for faculty travel has no effect on unrestricted net assets at
the current year end because the effect is offsetting, meaning, increase in unrestricted
net assets upon reclassification from “temporarily restricted to unrestricted” and
decrease in unrestricted net assets when the contribution is used or expended.
Classifications of Cash flow or Non Profit Organizations in the Cash Flow

Statements
1. Operating Activities – includes “unrestricted” cash contributions, unrestricted

revenues and expenses.
2. Investing activities – includes cash flows from acquisition and disposal of property,
plant and equipment, investments, and other long-term assets.
3. Financing activities – includes temporarily or permanently “restricted” cash

contributions and cash flows from borrowings and repayment of borrowings.
Financial Statements Pro- Forma Forms
STATEMENT OF FINANCIAL POSITION
XXX Organization
Statement of Financial Position
December 31, 20x1 and 20x2
(In thousands)
ASSETS 20X1 20X2
Cash and cash equivalent P xxx P xxx
Receivables xxx xxx
Inventories and prepaid expenses xxx xxx
Assets restricted to investment in building and equipment xxx xxx
Land, building and equipment xxx xxx
TOTAL ASSETS P XXX P XXX

Group 10
LIABILITIES AND NET ASSETS
Vouchers payable P xxx P xxx
Refundable advances xxx xxx
Long-term debt xxx xxx
TOTAL LIABILITIES P XXX P XXX
Net assets:
Unrestricted P xxx P xxx
Temporarily restricted xxx xxx
Permanent restarted xxx xxx
TOTAL NET ASSETS P XXX P XXX
TOTAL LIABILITIES AND NET ASSETS P XXX PXXX
STATEMENT OF ACTIVITIES
XXX Organization
Statement of Activities
For the year ended December 31, 2ox1
Temporarily Permanently
Unrestricted Restricted Restricted Total
Revenues, gains and other support:
Contributions P xxx P xxx P xxx P xxx
Fees xxx xxx
Total P xxx P xxx
Expenses and losses
Program A P xxx P xxx

Group 10
Program B xxx
xxx
Management and General xxx
xxx
Fund Raising xxx
xxx
Total P xxx
P xxx
Change in net assets P xxx P xxx
P xxx P xxx
Net assets at beginning of year xxx xxx
xxx xxx
Net assets at end of year P xxx P xxx
P xxx P xxx
Statement of Cash Flows
XXX Organization
Statement of Cash Flow
For the year ended December 31, 20X1
Cash flows from operating activities:

Cash received from members and contributors P xxx
Cash received from service recipients xxx
Cash paid for:
Program A xxx
Program B xxx

Group 10
Fund raising xxx (xxx)
Cash paid to employees and suppliers (xxx)
Net cash from operating activities P xxx
Cash and cash equivalents at beginning of year xxx
Cash and cash equivalents at end of year P xxx
Reconciliation of change in net assets to net received from operating activities:

Change in net assets P xxx
Adjustments to reconcile change in net asset to
net cash from Operating activities:
Depreciation xxx
Decrease in refundable advance (xxx)
Increase in vouchers payable xxx
Increase in receivable xxx
Increase in inventories and prepaid expenses xxx
Net cash flow from operating activities P xxx
LOAN FUNDS
• Consist of resources that are available for loans to students.

• Originate from gifts, they may be built up over a period of years from student fees for
such purpose or for transfers from endowment fund whose income is available for such
purpose.
• Can be made with or without interest depending upon the conditions established by
those providing loan the loan fund.
• Nonexpendable uncollectible loans, fund administrative expenses, and losses on the
sale of fund investments, and as a result of credits arising from interest on loans,
income from fund investments , and gains on sale of fun investment.
Transactions related to loan of NPO universities:

1. Receipt of cash gift to be used for loans to students, P50,000.
Cash 50,000
Loan Fund net assets 50,000
2. Purchase of securities for P25,000 which includes accrued interest of P600.
Investment 25,000
Accrued Interest 600
Cash 25,600
3. Loans to students, P20,000.
Notes Receivables 20,000
Cash 20,00
4. Collections of interest on investments, P1,500.
Cash 1,500
Accrued Interest 600

Group 10
Loan Fund net assets 900
5. Collection of loans with interest of P150, P7,650.
Cash 7,650
Notes Receivable 7,500
6. Uncollectible loans written off, P300.
Notes Receivable 300
Resources are balanced by the account Loan Fund Balance/ Loan Fund Net Assets.
Note: The Accounts are hypothetical In nature to illustrate the entries.
NPO University
Loan Fund
June 30, 20B
ASSETS
Cash P13,550
Investments 25,000
Notes Receivable 12,200
TOTAL ASSETS P 50,750
TOTAL NET ASSETS P 50,750
NPO University
Loan Fund
Statement of Activities
For the year ended June 30, 20B
Revenues:
Interest on investments P900
Interest on loans 150 1,050
Less: Expenses/ losses:
Uncollectible loans written 300
off P 750
Excess of revenue over
expenses

Group 10
NPO University
Loan Fund
Statement of Cash Flows
Cash from operating activities:

Receipts of gifts P 50,000
Excess of receipts over expenses 750
Net cash from operating activities or net P50,750
assets
ENDOWMENT AND OTHER NONEXPENDABLE FUNDS

• Formed when cash or other properties are transferred to the institution provided that
only income produced by such resources can be used for the benefit of the institution.
• Unrestricted endowment is undependable; although it may change as a result of the
sale of restrictions are placed on the use of fund income by the institution. Income
becomes available to the unrestricted current fund.
• Restricted endowment is when the use of the fund income is limited to certain
objectives. Income is transferred to the appropriate restricted current fund or to the
plant fund.
• Endowments are created by transfer of assets directly to the institution.
• Funds temporarily functioning as an endowment are resources not currently required
by unrestricted current fund may be transferred out of this fund to be administered as
an endowment until the resources are required for alternative use.
• In maintaining a single set of books for the endowment fund group, investments and
other property items should be identified with specific endowments, and separate
endowment fund balances should be reported for each endowment.
• Earnings don’t need to be reflected on the books for the endowment funds that may be
entered directly on the books of the funds receiving the earnings.
Transactions related to endowment fund:

1. Receipt of cash from donor in establishment of Endowment Fund A, P1,000,000. No
restrictions are made as to use of endowment income.
Cash 1,000,000
Endowment Fund A balance 1,000,000
2. Receipt of securities from 2 donors in establishment of Endowment Funds B and C.
Endowment Fund B-10,000 shares of X Co. ordinary shares, value on date of transfer is
P715,000. Endowment Fund C-2,500 shares of Y Co. preference shares, value on date
of transfer P245,000. No restrictions are made as to use of endowment income.
Investments-ordinary shares 715,000
Investments-preference shares 245,000
Endowment Fund B balance 715,000
Endowment Fund C balance 245,000
3. Pooling of Endowment Funds A, B, C. Endowment fund balances were restated in terms
of market values of securities as date of pooling as follows: Ordinary shares market
value, P750,000 and Preference shares market value-P250,000.

Group 10
Pooled Cash 1,000,000
Pooled investments- ordinary shares 750,000
Pooled investments- preference shares 250,000
Cash 1,000,000
Investments-ordinary shares 715,000
Investments-preference shares 245,000
Endowment Fund B balance 35,000
Endowment Fund C balance 5,000
4. Purchases of P900,000 of Z Co. bonds at a price of 105.
Pooled investments- bonds 900,000
Pooled investments- unamortized bond premium 45,000
Pooled Cash 945,000
5. Collection of interest and dividends on pooled investments, P107,500.
Pooled Cash 107,500
Undistributed pooled income 107,500
6. Premium amortization on pooled investments, P2,250.
Pooled investments- unamortized bond premium 2,500
7. Distribution of income on pooled endowments to unrestricted and restricted current
funds: Endowment Fund A: 1,000,000/2,000,000 x 105,000 or P52,500. Endowment
Fund B: 750,000/2,000,000 x 105,000 or P30,375. Endowment Fund C:
250,000/2,000,000 x 105,000 or P13,125.
Pooled Cash 105,000
8. Sale of Y Co. preference shares for P260,000.
Pooled Cash 260,000
Pooled investments- preference shares 250,000
Gains and losses on pooled investments 10,000
9. Receipt of gift of properties to be used as a dormitory. Net income after recognizing an
annual charge for depreciation of P10,000 is to be used for certain restricted purposes.
Appraised values of properties on the date of gift: Land- P125,000, Buildings-
P175,000.
Land 125,000
Buildings 175,000
Endowment Fund D balance 300,000
10. Receipt of cash from unrestricted current fund to be used as an endowment fund until
alternative use is authorized, P50,000.
Cash 50,000
Principal temporarily functioning as Endowment Fund
E 50,000
balance
11. To recognize resources of P400,000 held by trustee as an endowment. No restrictions
are made as to use of endowment income.
Fund held by trustee 400,000
Endowment Fund F balance 400,000
12. Amount receivable from restricted current fund representing recovery of depreciation
on endowment properties (dormitory), P10,000.
Due from restricted current fund 10,000

Group 10
Accumulated depreciation- buildings 10,000
Revenues and expenses relating to operations of the properties are reported in the
restricted current funds.
PLANT FUNDS
• Formed when cash or other properties are transferred to the institution subject to the
requirement that specified payments be made to a designated beneficiary during his
lifetime. sometimes included with endowment funds for accounting and reporting
purposes.
• Balances are increased by gifts subject to annuity agreements, gains on the sale of
annuity fund assets, payments to annuitants, and asset transfers.
NPO University
Endowment and Other Nonexpendable Funds
June 30, 20B
ASSETS
Cash P 50,000
Due from restricted current funds 10,000
Pooled cash 317,500
Pooled investments:
Ordinary shares P 750,000
Bonds 900,000
Unamortized bond premium 2, 1,692,500
500
Land 125,000
Buildings P 175,000
Less: Accumulated depreciation 10,000 165,000
Fund held by trustee 400,0

Group 10
00
TOTAL ASSETS P
2,760,000
Gains and losses on pooled investments P 10,000

Net Assets:
Unrestricted
Endowment Fund A P 1,000,000
Endowment Fund B 750,000
Endowment Fund C 250,000
Endowment Fund F 400,000
Total P2,400,000
Restricted:
Endowment Fund D 300,000
Principal temporarily functioning as Endowment 50,000
Fund E 2,750,00
Total 0
TOTAL LIABILITIES AND NET ASSETS P2,760,000
Transactions related to annuity fund of NPO University:
1. Receipt of cash of P125,000 subject to condition that P5,000 per year be paid to the
donor during his lifetime, any balance available for educational and general purposes.
Account Titles Debit Credit
Cash 125,000
Annuity net assets 125,000
2. Purchase of securities for P120,000 that includes accrued interest of P2,000.

Investments 118,000
Accrued interest 2,000
Cash 120,000
3. Collections of income for the year ended June 30, 20B, P9,500.
Cash 9,500
Accrued interest 2,000
4. Recognition of amount payable to annuitant, P5,000.

Due to annuitant 5,000

Group 10
5. Amount becoming available for educational and general purposes according to annuity
agreement, P2,500.
Due to Unrestricted Current Fund 2,500
NPO University
Annuity Fund
June 30, 20B
ASSETS
Cash P 14,500
Investments 118,000
TOTAL ASSETS P132,500
Due to annuitant P5,000
Due to unrestricted current fund 2,500
TOTAL LIABILITIES AND NET ASSETS P 50,750
NPO University
Annuity Fund
Statement of Charges in Equity
Net assets, beg. P-0-

Add: Increase from gift subject to annuity P125,000
Increase from income for year 7,050 132,500
Total P132,500
Less: Amount payable to annuitant for year P 5,000
Amount payable to unrestricted current fund 2,500 7,500
Net assets, end P 125,000
PLANT FUNDS
Three groups:
1. Resources that are held for plant expansion and replacement
2. Resources that are held for retirement of long-term debt incurred in the acquisition of
the plant
3. The specific physical resources comprising the plant.

Group 10
Three balancing groups of accounts for plant resources:
1. Unexpended plant funds- consist of cash, securities, receivables and other assets that
are used for the acquisition of new plant or replacement of existing plant. The
difference between the assets and liabilities. This balance is commonly divided into (1)
the portion to be applied to plant additions and (2) the portion to be applied to
renewals and replacements.
2. Retirement of indebtedness funds- consist of cash, securities, and other assets that are
to be used for the retirement of plant indebtedness. Fund accounts are balanced by a
single fund balance reporting total resources available for retirement of indebtedness.
3. Invested in plant- consist of the individual property items that compose the educational
plant. Carries any long-term indebtedness relating to plant acquisitions. The difference
between plant assets and related liabilities. This balance is commonly divided to show
the different sources of plant financing- gifts, current funds, and endowment funds.
Transactions related to that Unrestricted Plant Funds of NPO University:

1. Receipt of cash gift to be used for plant acquisitions, P100,000.
Cash 100,000
Unexpended plant funds balance- plant addition 100,000
2. Payment of additions to buildings, P85,000.
Unexpended plant funds balance- plant addition 85,000
Cash 85,000
3. Issue of bonds to raise funds for construction of buildings, aP1,500,000.
Cash 1,500,000
Unexpended plant funds balance- plant additions 1,500,000
4. Completion of buildings at contract price of 1,500,000.
Unexpended plant funds balance- plant additions 1,500,000
Contracts payable 1,500,000
5. Payment of contract, 1,500,000.
Contracts payable 1,500,000
Cash 1,500,000
6. Receipt of cash from unrestricted current fund plant renewals and replacements in
subsequent periods, P30,000.
Cash 30,000
Unexpended plant funds balance- renewals and 30,000
replacements
7. Purchase of securities, P30,000.
Investments 30,000
Cash 30,000
8. Collection of interest on investments, P750.
Cash 750
Unexpended plant funds balance- plant additions 750
Transactions related to that Retirement on Indebtedness Plant Funds of NPO

University:
1. Receipt of cash from unrestricted current for payment of mortgage installment due,
P25,000.
Cash 25,000
Retirement of indebtedness funds balance 25,000
2. Payment of mortgage installment due, P25,000

Group 10
Cash 25,000
3. Receipt of cash gift to be used for payment of installments due on mortgage in 20C-
20E, P75,000.
Cash 75,000
Transactions related to that Investment In Plant Funds of NPO University:
1. Receipt of gift of land, buildings, and equipment for educational and general purposes
valued at P4,000,000; properties are subject to mortgage for P1,000,000.
Land 850,000
Improvements other than buildings 150,000
Buildings 2,500,000
Equipment 500,000
Mortgage payable 1,000,000
Investment in plant- from gifts 3,000,000
2. Addition to buildings financed by gifts reported in unexpected plant funds, P85,000.
Buildings 85,000
Investment in plant- from gifts 85,000
3. Issue of bonds to be used for construction of buildings, P1,500,000
Buildings to be acquired 1,500,000
Bonds payable 1,500,000
4. Completion of buildings financed by bond issue
Buildings 1,500,000
Buildings to be acquired 1,500,000
5. Payment by retirement of indebtedness funds of current installment due on mortgage,
P25,000
Mortgage payable 25,000
Investment in plant- from current funds 25,000
6. Acquisition by general current fund of equipment, P15,000
Equipment 15,000
Investment in plant- from current funds 15,000
7. Acquisition by endowment fund of a dormitory valued at P300,000
Land 125,000
Buildings 175,000
Investment in plant- from endowments 300,000
8. To record depreciation on buildings represented by endowment, P10,000
Investment in plant- endowments 10,000
Accumulated depreciation 10,000
9. Retirement of equipment carried at P5,000
Investment in plant- from gifts 5,000
Equipment 5,000

Group 10
NPO University
Plant Funds
June 30, 20B
ASSETS
Unexpended Plant Funds:
Cash P 15,750
Investments 30,000 P 45,750
Retirement of indebtedness funds:
Cash 75,000
Invested in Plant:
Land P975,000
Improvements other than 150,000
Buildings P4,260,000
Buildings 10,000 4,250,000
Less: Accum. Depreciation 510,000
Equipment P5,885,000
Total 290,000 5,595,00
Less: Items carried in Endowment 0
funds P
TOTAL ASSETS 5,715,750

Group 10
Unexpended plant funds:
Balance- plant additions P 15,000
Balance- renewals and 30,750 P 45,750
replacements
Retirement of indebtedness funds: 75,000
Balance
Investment in plant: P 975,000
Mortgage payable 1,500,000 P2,475,000
Bonds payable
Investment in plant- P3,080,000
From gifts 40,000 3,120,000 5,595,00
From current funds 0
TOTAL LIABILITIES AND NET ASSETS P5,715,75
0
7. Agency
- Educational institution acts as an agent or trustee, holding certain assets on behalf of

others.
- when agency operations are:
- simple and limited duration=both asset accounts and accounts expressing the
institution’s accountability to others may be carried in the general or current fund.
- involved and continuing=an agency fund may be recognized and special agency books
established for the properties subject to agency control
- agency funds may be established for pension and retirement resources, special
organization resources, student deposits, and tax withholding amounts.
- accounting for the agency is the same as it would be for a private business.
HOSPITALS
*Functions:
- Provide for reception, care and medical and surgical treatment of the sick or injured
- rooms are provided and foods are supplied
- major activities center about inpatients, but frequently render outpatient care and
emergency services
- carry on special activities such as research and nurses training
- operate number of auxiliary enterprises such as pharmacies for outpatients and

cafeterias for staff members and visitors
- its operations call for important administrative activities like:
 hospital staffing

Group 10
 registration of patients
 operation of the physical plant
 food
 laundry and housekeeping management and budgeting
 accounting
 billing and collecting
The major source of hospital support is normally charges that that are made to patients
for services. However, such charges frequently fail to cover the full cost of hospital operations,
and significant sums must be sought from contributions and grants from private, public and
charitable sources.
Funds for Hospital
- Accounting for hospitals are similar to educational institutions that acquires a revenues
that must be applied to specific objectives.
- There’s also certain accounting differences that should be pointed out
- Hospital generally does not require variety of funds required by the educational
institution. Differences of the two units are found to their operating summaries.
Educational Institution
 revenues were compared with expenditures
 a “modified accrual basis” was employed and depreciation of the educational plant was
generally ignored.
Hospitals
 analysis and a summary of operations that comes closer to that of private business is
normally warranted
 sell specific services
 expectation by patients, group purchasers of insurance protection, and insurance

companies selling hospital protection that charges for services will bear a close
relationship to the costs of these services.
 although contributions may be available suggest that hospital revenues should be set
at levels that will provide for the ultimate replacements of properties
 these factors suggest that revenues, be compared with expenses, that a “full accrual
basis” be employed, and that depreciation of hospital properties be recognized in
arriving at total operating costs.

Group 10
Four Major Fund Groupings of Hospital
A.GENERAL OR CURRENT FUNDS
 summarized the current resources that are to be used in meeting the obligations
arising from general operations
 resources that can be applied without restriction are reported here
 Expenditures for which specific funds have not been provided are financed from these
resources.
 This is the same in nature and function as the general or current fund of the
educational institution.
*To illustrate the accounting for the general fund transactions affecting the general fund of
NPO Hospital and entries to record these transactions are listed below.
1. Charges for services to patients for year ended December 31,20B,P580000 of which
P45000 is still due: adjustments and allowances of P60000 apply to charges.
Cash P475000
Accounts Receivable 45000
Free service and adjustment-contractual patients 40000
Free service and adjustment-general patients 16500
Courtesy and miscellaneous allowances 3500
Earnings from routine services-inpatients P320000
Earnings from routine services-outpatients 50000
Earnings from special services 210000
2. Other hospital revenues, P420000 of which P10000 is still due from temporary fund in
reimbursement of research expenses.
Cash P410000
Due from temporary fund 10000
General contribution, donations, legacies P180000
and bequests
Grants from community chests, 122000
foundations
Donated services and commodities 10,000
Income transfers from temporary funds 57,500
Miscellaneous revenues 50,000
3. Collections of interest and dividends on endowment funds securities, P85000 of which

P5000 is due from endowment fund #1 representing bond premium amortization.
Cash P85, 000

Due from Endowment Fund #1 P5, 000

Group 10
Income from investments 80,000
4. Expenditures for hospital supplies, P200000 of which P25 has not been paid.
Inventory supplies P200, 000

Cash P175, 000
Vouchers payable 25,000
5. Hospital supplies charged put, P170000
Administrative and general P5000

Household and property 10000
Professional care of patients 15000
Dietery 120000
Outpatient and emergency 5000
Other expenses 15000
Inventory of supplies P170000
6. Payment of hospital salaries and wages, P490000

Dietery 60000
Cash P490000
7. Payment of hospital expenses other than salaries and wages

Dietery 7500
Cash P75000
8. Payments of interest on mortgage, P60000 and of installment due on mortgage carried as
liability in the plant funds, P50000.
Interest expense P60000

General fund balance 50000
Cash P110000
9. Adjustments required on December 31,20B;
 allowance for uncollectible accounts, P2500
 accrued salaries and wages, P5000

Group 10
 charges for depreciation on properties carried as assets by plant funds, P85000
 to recognize amount to be paid to plant funds equal to depreciation on properties.
Bad debts P2500

Allowance for doubtful accounts P2500

Dietery 750
Other expenses 1500
Cash P5000
Depreciation P85000
General or current fund balance P85000

Due to plant funds P85000
*The transfer of cash to plant funds to finance the ultimate replacement of properties is
recorded by a debit to general fund balance and a credit to cash. In the example, recognition
of reimbursement due to plant funds is reported by a credit to a payable, the payable would
be closed when the cash is transferred.
10. To close general operating revenue and expenses accounts at the end of the period.
Earnings from routine services-inpatients P320000

Earnings from routine services-outpatients 50000
Earnings from special services 210000
Free service and adjustment-contractual 40000
patients
Free service and adjustment-general patients 16500
Courtesy and miscellaneous allowances 3500
Bad debts 2500
Administrative and general 111000
Dietery 188250
11. To close other revenue and expenses accounts at the end of the period.
General contribution, donations, legacies and P180000

bequests
Grants from community chests, foundations 122500
Donated services and commodities 10000
Income transfers from temporary funds 57500

Group 10
Income from investments 80000
Miscellaneous revenues 50000
Interest expense P60000
Depreciation 85000
General or current fund balance 355000
*In considering the presentation of hospital revenues for statement purposes, the following
classifications are used;
 gross revenues from patients
 deductions from revenues and
 revenue sources
*In considering operating expenses, it recognizes the following classifications;
 administrative and general
 dietery
 household and property
 professional care of patients
 outpatient and emergency
 other expenses
B.TEMPORARY FUNDS
 Composed of current resources that, while available for current purposes, are subject
to certain limitations in their use
 For example, resources from gifts on grants and income from endowment funds that
can be spent only for specified purposes, such as research, a medical library, or nurses
training, would be reported as temporary funds
 Temporary funds are identical in nature and functions to the restricted current funds of
the educational institution.
 Temporary fund transactions of NPO Hospital and the entries to summarize these are
listed below:
1. Receipt of cash gift to be used for medical research, P10000

Cash P100000
Temporary fund A balance P100000
2. Purchase of securities, P85000
Temporary investment -fund A P85000

Cash P85000
3. Receipts of cash gifts to be used for books and journals for hospital patients, P10000

Group 10
Cash P10000
Temporary fund balance P10000
4. Sale of securities, book value, P25000, for P23500
Cash P23500
Temporary fund A balance 1500
5. Collections of interest and dividends
Cash P5000
6. Expenditures during year by general fund for research chargeable to temporary fund A,
P50000; cash transferred to general fund, P40000.

Cash P40000
Due to general fund 10000
7. Payment of general fund for books and journals chargeable to temporary fund B balance,
P7500.

Cash P7500
8. Adjustments required on December 31,20B; accrued interest on securities, P250
Accrued interest in temporary fund P250

In the example, the temporary fund books summarize two temporary fund, and a separate
fund balances are maintained to report the respective fund equities. It should be observed
that changes in temporary fund balances arising from revenues, expenses and distributions
are recorded directly in the fund balances; when there are many changes and these are to be
reported in special operating statements, nominal accounts would be established to
accumulate profit and loss derail.
C.ENDOWMENT FUNDS
 represent resources that have been transferred under conditions that limit
expenditures to the income that is produced by such resources.
 Assets may be transferred directly to the hospital, or they may be transferred to a

trustee who administers them for the benefit of the institution
 May also be created by the action of the governing board of the hospital.
 Terms of it may place no restrictions on the use of the endowment income, or they
may specify a particular purpose for which the income is to be used.
 In the absence of restrictions, its income becomes available to the general fund; when
there are restrictions; income is in a temporary fund.

Group 10
 Endowment fund transactions of NPO Hospital and the entries to summarize these are
listed below.
1. Receipt of bonds in establishment of Endowment fund #1 as follows: Co.S bonds Face

value, P500000, market value on date of transfer, P470000.
Investments in bonds at fair value(Endowment fund P1000000

#1)
Investments-unamortized bond premium(Endowment 50000
fund #1)
Investments-unamortized bond discount P30000
(Endowment fund #1)
Endowment fund #1 balance 1020000
2. Receipt of cash in establishment of Endowment fund # 2, P250000.Endowment income is to

be used for specified research projects.
Cash P250000
Endowment fund #1 balance P250000
3. Purchase of 1000 shares of Co.T preference shares, P240000.
Investment in preference shares(Endowment fund #2) P240000

Cash P240000
4. Collection of interest by general or current fund that includes P5000 reimbursable to
Endowment fund #1 for bond premium amortization.
Due from general or current fund P5000

Investments-unamortized bond P5000
premium(Endowment fund #1)
5. Sale of Co.S bonds at fair value, P250000
Cash P250000
Investments-unamortized bond discount (Endowment 15000
fund #1)
Investments-at bonds at fair value(Endowment fund P250000
#1)
Endowment fund #1 balance 15000
In the example, Endowment fund books summarize to endowment and separate endowment
fund balances summarize their respective fund equities. It should be observed in the example
that endowment fund income is reported directly in the fund that in entitled to such income.
When revenue and expense are involved in a determination of net income, revenue and
expense can be summarized in the Endowment funds books; the fund net income, when
determined is then transferred to the appropriate fund.
D.PLANT FUNDS
Two Groups of Plant Resources
1. Physical resources comprising the hospital properties

Group 10
2. Cash and other assets that is available for the improvement and the replacement of
the hospital properties.
Although the two asset of groups are recognized, hospitals would nevertheless combined
these within a single plant funds category
When there are claims against plant fund resources in connection with original financing of
properties, construction in progress, or current property acquisitions, such obligations would
be recognized in the plant funds.
Funds are balanced by two plant fund balances:
1. Investment in plant
2. Reserve for plant improvement and expansion
Transactions affecting the plant funds of NPO Hospital and the entries to record these
transactions are shown below:
1. Acquisition of land construction of hospital financed by gifts of cash, P1500000 and cash
raised through a mortgage, P1000000.
Land P250000
Building 1750000
Equipment 500000
Mortgage Payable 1000000
Investment in Plant 1500000
2. Receipt of gifts of cash of P50000 and securities valued at P100000 for plant improvement
and replacements
Cash P50000
Investments 100000
Reserve for plant improvement and replacements P150000
3. Acquisition of equipment, P30000 mortgage, P1000000.
Reserve for plant improvement and replacements P30000

Cash P30000
Equipment P30000
Investment in Plant P30000
4. Payment by general fund of mortgage installment, P50000.
Mortgage Payable P50000

Investment in Plant P50000
5. Adjustments required on December 31,20B:
a) accrued investments on investment,P1500;
b) depreciation for plant assets for year,P85000;
c) amount recoverable from general fund equal to depreciation on plant assets.
Accrued interest on investments P1500
Reserve for plant improvements and replacements P1500

Group 10
Investment in plant P85000
Accumulated Depreciation-building P35000
Accumulated Depreciation-equipment 50000
Due from general fund P85000

Reserve for plant improvements and replacements P85000
Alternative approaches have been suggested for analyzing and recording plant funds
transactions of the hospital.
Probably the best approach would recognize two self-balancing sets of accounts, one
summarizing the existing physical plant and the other summarizing resources that are held for
plant improvement and replacement.
With such an approach, the analysis of transactions affecting hospital plant assets, liabilities,
and fund balances or net assets is the same as that employed for the educational unit.
However, the entries relating to existing plant and to improvement and replacement
resources are made in self-balancing from within a single set of books instead of in separate
sets of books as in the case of the educational unit.
COOPERATIVES
A cooperative is a business organization owned and operated by a group of

individuals for their mutual benefit. Cooperatives are defined by the International Co-operative
Alliance's Statement on the Co-operative Identity as autonomous associations of persons
united voluntarily to meet their common economic, social, and cultural needs and aspirations
through jointly owned and democratically controlled enterprises. A cooperative may also be
defined as a business owned and controlled equally by the people who use its services or by
the people who work there. Cooperative enterprises are the focus of study in the field of
cooperative
A credit cooperative is financial organization owned and operated by its member with the
following objectives:
 to encourage saving among its members
 to create pool of such savings from which loan for productive purpose may be granted
to its member
 to provide related services to its members to maximize the benefit from such loan.
Current accounting policies and procedures adopted by credit cooperatives were used
as basis in development of this manual. Key officers of cooperatives were interviewed and
financial statements and relevant reference materials were gathered from organizations
during capacity building for cooperatives.
As a general rule, a good accounting system includes the following:
1. A well-conceived chart of accounts and general ledger system.
2. Clearly laid out procedures for keeping accounting records accurate and up to date.

Group 10
3. Skilled personnel whose primary responsibility is to track, update and report financial
information
4. A sound system for monitoring loan disbursements, collection and
5. Deposit transaction.
6. Appropriate accounting safeguard and control to provide reasonable assurance that

accounting books are complete and accurate.
CONCEPTS AND GENERAL PRINCIPLE
1. Separate Enterprise
Each cooperative is a separate business enterprise requiring the maintenance of
comprehensive accounting records and financial reporting practices to provide meaningful
information to members, officers, directors and audit committee of cooperative, government
agencies, the apex organization and other interested third parties.
2. "Going Concern" Concept
Each credit cooperative should normally maintain its account s as "going concern: on
the basis that its operation will continue definitely. Therefore , Assets and liabilities should be
presented in the financial statement at historical cost and not as liquidation value.
3. Monetary Basis of Accounting
Financial Statements in the Philippines are expressed in terms of Philippine Peso (Php),
hence, accounts of credit cooperative should be stated in peso amounts involve at the time
the transaction occur
4. Consistency in Accounting Practice From Period to Period.
Consistent accounting practices should be followed by each cooperative from one
accounting period to the next.
5. Timely Recognition in Accounting Records
Accounting record should be recorded on a timely basis so that all material information
applicable to each accounting period will be shown in the record. To properly recognize in
accounting record and financial reports the reasonable value of assets, liabilities, equity
revenues and expenses, each credit cooperative should make provision for losses that may
be sustained I the collection or conversion of loans and other assets by charge against current
operation.
6. Materiality
Material fact relating to the credit cooperative's activity must be recognize in the
accounts of said cooperative and reports in its financial statements. A statement, fact or item
is material if, fiving full consideration to the surrounding circumstances as they exist at the
time, it is of such a nature that its disclosure would likely influence or "make a difference" in
the judgment and conduct of a reasonable person.
7. Principle of Disclosure
This accounting principle requires that the members of the cooperative and other users
of the financial statements should be informed of material and relevant information about
economic and financial affair of the cooperative. This can be done either in the financial
statements or in the notes that company the statements of supplementary schedules and
other presentation. Full disclosure requires reporting of all facts that can make a difference in
the decision of the users and that the accounting information reported must be
understandable and not susceptible to misinterpretation. Such disclosure makes the financial
statements more relevant and useful and less subject to misinterpretation.
Adequate information to be disclosed in the financial statements may not be
presented in detail provided that important and relevant facts are revealed and made clear.
The full-disclosure principle requires the financial report to give more emphasis to substance
over form. This means that the substance should not be made less clear or hidden.

Group 10
There are, however, limits to the amount of disclosure that can be made in financial
statements or in accompanying notes. As minimum information, the following should generally
be disclosed.
a. Accounting method used I preparing financial statements
b. Changes in the use of accounting method during current period
c. Term of major borrowing arrangements
d. Existence of large contingent liabilities
e. Major proposed asset acquisition
f. Contractual provision relating to leasing arrangements and employee pension

and bonus
g. plan
h. Significant events affecting financial position, including major contracts for sale
of services and pending legislation which mat affect significantly the
operations of the cooperative
i. Other materials and significant events which will occur after the end of
accounting period and before the financial statements are released and which
are relevant to users.
8. Principle of Conservatism
Each credit cooperative should maintain its accounting records on a conservative basis.
It should make reasonable provision in the accounts for probable losses on assets and for the
settlement of liabilities. It should not materially overstate nor understate its asset, liabilities,
revenues or expenses.
9. Accounting Basis
Modified Cash Basis is the prescribed accounting basis for a cooperative. This is a
combination of cash basis of accounting and accrual basis of accounting. Under the modified
cash basis, the accounting is based on actual receipt s and disbursements of the credit
cooperative except that provision should be made to reflect:
a. Liabilities which are not paid when due;
b. Unpaid interest on share capital and patronage refund applicable to the accounting
period;
c. Deferred credits and charges that are applicable to future periods;
d. Estimated losses on loans outstanding and other risk assets; and
e. The depreciation of property and equipment
Other two accounting bases are;

a. Cash Basis - Revenue is recorded and accounted for when actually collected and expenses
are accounted for when actually paid.
b. Accrual Basis - It provides the most complete and informative record of the financial
activities of the cooperative. Under accrual basis of accounting, the credit cooperatives record
revenue when earned and expenses and liabilities as incurred regardless of the timing of the
actual receipt or payment.
10. Accounting Safeguard and Control

Group 10
Each credit cooperative should adopt appropriate accounting safeguard and control to
provide its members and the general public reasonable assurance that accounting records are
complete and accurate.
11. Accounting period
The accounting period shall be 12-month period starting January 1 and ending
December 31, as common practiced.
FINANCIAL STATEMENTS
Financial statements are the means by which the information accumulated and
processed in financial accounting is periodically communicated to those who use it. They are
designed to serve the needs of a variety of users, particularly owners and creditors. Trough
the financial accounting process, the myriad and complex effect of the economic activities of a
cooperative are accumulated, analyzed, quantified, recorded, summarized and reported as
information of two basic types;
a. financial condition, which relates to a point in time
b. financial operations, which relates to a period of time
Notes to financial statement, which may explain headings, captions or amounts in the
statements or present information that cannot be expressed in terms of money and those
descriptions of accounting policies are integral part of the statements.
A. Statement of Financial Condition (Balance Sheet)
The statement of financial condition presents the difference between the total assets and
total liabilities. The statement at any date present s an indication in conformity with generally
accepted accounting principles of the financial status on the cooperative at a particular point
of time.
B. Statement of Operation (Statement of Net Surplus)
Presents the revenues, expenses, gain, losses and net surplus (net loss) recognized
during the period and thereby presents an indication in conformity with GAAP of the result of
the cooperative's service directed activities during the period. The information presented in
the statement of operation is usually considered as the most important information provided
by financial accounting because the net surplus is paramount concern to those interested in
economic activities of cooperative.
C. Statement of Cash Flow is a formal statement summarizing all operating, investing and
financiang activities of a cooperative.
D. Other Schedules such as:
a. Bank Reconciliation
b. Aging of Loans receivables
d. Property and equipment
e. Members loans receivable, saving/time deposit, subscribed and paid-up share capital.
f. Investment
g. Accounts Payable
h. Loans Payable
i. Use of:
i. Reserve refund
ii Optional refund
iii Education and training Fund
Apex
Local

Group 10
Attachments:
Comparable Financial Statements of Baguio- Benguet Community Credit
Cooperative for the year ended 2008- 2009
1. Statements of Financial position
2. Statement of Changes in Equity
3. Statement of Financial Operations
4. Statements of Cash Flows

Group 10
Group 10
Group 10
Group 10
Reference:
 Accounting for Government and Non-Profit organizations by Josephine

Antonio – Ocampo, CPA, MPA 2010 Edition
 Theory of Accounts by Conrado Valix, 2009 edition
 BBCCC Financial Statements published magazine courtesy of BBCCC.

Group 10

Accounting For Non-Profit Organizations

Încărcat de

Informații document

Descriere originală:

Titlu original

Drepturi de autor

Formate disponibile

Partajați acest document

Partajați sau inserați document

Opțiuni de partajare

Vi se pare util acest document?

Este necorespunzător acest conținut?

Drepturi de autor:

Formate disponibile

Accounting For Non-Profit Organizations

Încărcat de

Drepturi de autor:

Formate disponibile

Saint Louis University

School of Accountancy and Business Management

Accounting for Non- Profit Organizations

Accounting 303 MWF 2:30-3:30 D801

ACCOUNTING FOR NON-PROFIT ORGANIZATION

Accounting For Non Profit organizations – Page 1 of 41

What is a non-profit organization?

Some examples are:

1. Voluntary health and welfare organizations:

Purpose of Financial Statements

e. The service efforts of an organization

Accounting For Non Profit organizations – Page 2 of 41

a. support of particular operating activities,

b. investment for a specified terms,

c. use in specified future period, or

d. acquisition of long-lived assets. Donors’ temporary restrictions may require that

a. evaluate the organizations performance during a period,

Accounting For Non Profit organizations – Page 3 of 41

STATEMENT OF CASH FLOW

There are more than 40 professional organizations accredited by the Professional

The activities of an educational institution may be classified as :

a. Instructional - include both resident and extension instruction, public service,

b. Administrative - auxiliary include staffing and promotion, registration and enrollment,

Accounting For Non Profit organizations – Page 4 of 41

3. Endowment and other nonexpendable funds

Explain the accounting for non-profit organizations.

Funds commonly used by non-profit organizations include the following:

Unrestricted Fund/ General Fund/ Current Fund

Restricted Fund/ Restricted Current Fund/ General Fund

Accounting For Non Profit organizations – Page 5 of 41

Accounting for cash contributions or donations

Accounting for “contributed materials”

Accounting for “contributed services”

a. The services create or enhance a non financial asset.

To increase expense and increase unrestricted revenue, contributed services is recorded as

Salaries expense xxx

Accounting for Contributed facilities

Accounting For Non Profit organizations – Page 6 of 41

Rental expense xxx

Classifications of Expense of a nonprofit Organization

All expense of a non profit organization is reported as unrestricted in the statement of

What is a restricted fund?

Explain endowment of fund.

A “quasi-endowment fund” is a fund established by the governing board of the nonprofit

Accordingly, a quasi-endowment fund is included on “unrestricted net assets” because this is

Accounting For Non Profit organizations – Page 7 of 41

• Used to account for assets held by the nonprofit organization as custodian.

• Example: A university may act as custodian of cash of a student organization. The

• Undistributed cash of the student organizations is reported as liability of the

Life income Fund

• Used to account for stipulated payments to a named beneficiary during the

• established for land, building, and equipment

Components of Financial Statements of Non-Profit Organizations

Accounting For Non Profit organizations – Page 8 of 41

- It reports expenses by functional classification such as program services and

3. Statement of Cash Flows

4. Notes to Financial Statements

5. Statement of Functional Expenses – required only to voluntary health and welfare

Classifications of Net Assets

• reported in the statement of Financial Position

1. Unrestricted net assets – assets in the “unrestricted fund”.

3. Permanently restricted net assets – “permanently endowment fund”