NPO.pdf - AFAR – NOT FOR PROFIT ORGANIZATIONS LECTURE NOTES...

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Page 1 of 5AFARNOT FOR PROFIT ORGANIZATIONSLECTURE NOTESFINANCIAL STATEMENTS REQUIRED FOR PRIVATE NOTFOR PROFIT ORGANIZATIONS.1.Statement of financial position2.Statement of activities3.Statement ofcash flows4.SpecificforVoluntaryHealthandWelfareOrganizationsStatement of Functional ExpensesStatement of Financial positionshows assets andliabilities similar to commercial accounting.Net assetsare classified into:1.Unrestrictedno donor imposed restrictions2.Temporarilyrestrictedwithdonorimposedstipulations ( expiration of time and fulfillment of userestrictions)3.Permanently restrictedwith donor imposedrestrictions that do not expire nor can be removed byNPO activity.Statement of Activitiesshows revenues, expenses,gains and losses as well as reclassification among thedifferent types of net assets.The change in net assetsfor each type is required.Expenses are required(reported) only in unrestricted net assets.Statement of Cash Flowssimilar to the Cash Flowsprepared in commercial accounting.Specific funds used by not for profit organizations:1.Unrestricted fundinclude all the resources that areavailable for use by authority of the Board ofDirectors (even though designated for specificpurposes) and are not restricted by donors.2.Restricted fundaccounts for assets available forcurrent use but are not derived from the operationsof the NPO’s. Theseassets aretransferred tounrestricted funds at the time the designatedexpenditure is made.3.Endowment funda.Permanentprincipal is to be maintainedindefinitely in revenue providing investmentsb.Termprincipal may be expended after passageof a period of timec.Quasiestablished by Board of Directors underits control4.Agency fundused to account for assets held byNPO as a custodian.5.Others; like annuity funds, loss funds (for colleges)and plant funds.Other important considerations:1.Revenues and gains come from own principal andauxiliary activities or from donors.Revenues areaccrued at full rates even though some of it perhapsmay be waived.2.Contributionscontributions of cash and otherassets are recognized when received and credited tocontributions revenue (Restricted or Unrestricted).Contributed services and facilities are recognizedboth as expense and contributions revenues, net ofany cost paid related thereto.3.Pledges - unconditional pledges are recognized asreceivablesandcontributions(restrictedorunrestricted).Appropriate provisions for doubtfulpledges are also set up.4.Expenses and lossesall expenses of the NPO arerecognized in the unrestricted fund.Expenses can beclassified into.a.Programactivities that result in the distributionof goods and services to beneficiaries.

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Term
Fall
Professor
EmilyBryan
Tags
Non profit organization, functional expenses

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