NONPROFIT-ORGANIZATION-Lecture

NONPROFIT-ORGANIZATION-Lecture - NONPROFIT ORGANIZATION A...

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NONPROFIT ORGANIZATION A Nonprofit Organization is a legal and accounting entity that is operated for the benefit of society as a whole rather than for the benefit of individual proprietor or a group of partners or shareholders. Examples of nonprofit organization include the ff: a. Professional Associations f. Labor Unions b. Schools, Colleges and Universities g. Performing Arts Organization c. Hospitals h. Private and Community Foundations d. Cooperatives i. Religious Organizations e. Voluntary Health and Welfare Organizations Funds commonly used by nonprofit organizations include Unrestricted Fund, Restricted Fund, Endowment Fund, Agency Fund, Annuity Fund and Life Income Fund, Loan Fund and Plant Fund. Unrestricted Fund The Unrestricted Fund or General Fund includes all the assets of a nonprofit organization that are available for use as authorized by the board of directors and are not restricted for specific purposes. Revenue from Services The revenue from services of a nonprofit organization is accrued at full rate even though part or all of the revenue is to be waived or reduced . For example, a hospital shall record its revenue from services as follows: Accounts Receivables XX Patient Service Revenue XX Any subsequent contractual adjustment or reduction of revenue is recorded as: Contractual Adjustment XX Accounts Receivable XX Contributed Cash and Contributed Materials Cash contributions or donations are reported as revenue in the year received even though there is donor-imposed use or time restrictions on the donation. The entry for the cash contribution or donation is: Cash XX Contributions Revenue XX
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A hospital may receive free drugs or a university may receive free operating supplies. The contributed materials are recorded at fair value as follows: Inventory XX Contributions Revenue XX Contributed Services 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 for the donor of the services by the nonprofit organization. The contributed services are recorded as salaries expense as follows: Salaries expense XX Contributions Revenue XX Contributed Services are recognized in the statement of activities if either of the following conditions is met: a. The services create or enhance a nonfinancial asset. b. The services require specialized skills, are provided by individuals possessing those skills and would typically need to be purchased if not provided by donation.
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