Financial Statements and Analysis Test - 2

All revenue and expense of NPO are recorded in statement of activity which is income and expenditure account.

Balance sheet is a statement which shows all assets and liabilities from which the financial position of business can be ascertain.

Cash flow statement shows the inflow or outflow of cash during a year in the entity. It can be prepared with two ways:- one is Direct method and other is Indirect method.

Direct method uses actual cash flow information from the company's operations segment, instead of using accrual accounting values, While under Indirect method, the net cash flow from operating activities is determined by adjusting profit or loss for the effects of non-cash transaction

Under both the direct and indirect method, the presentation of the cash flow from investing and financing activities will be identical,

Classifying the expense on the basis of Programme and supporting activity is called functional basis. Since, Programme Exp. are the expense incurred to carry out programme of NPO and supporting expense are incurred for raising funds and For management.

Natural basis report the expense by categories such as rent , salary etc. 

Assets funds are used to account for the construction or acquisition of fixed assets such as buildings, equipment and roads.These are also called Capital project funds.

Restricted fund are those which can be utilized for the purpose only for which they are made like prize fund for giving prize etc. Hence Genral fund is not a restricted fund.

Temporarily restricted contribution are those that are subject to a time period condtion .

If a donor does not specify a restriction on his or her contribution, the amount received by the nonprofit is recorded as an asset and called unrestricted net assets. we show the change in net assets (Revenue - Expense) as unrestricted as the amount received can be utilized for any purposeor expense.

Permanently Restricted Assets are Assets of a not-for-profit organization that come with certain restrictions. Permanently restricted assets are any assets that are given to a not-for-profit by an outside individual or agency with restrictions on their use or purpose and the prinicpal portion of endowment fund is classified as Permanently restricted net assets.