Accounting for Not-for-Profit Organisations Test 12

Any amount invested outside is treated as investment so sport fund if invested outside it will be investment.

A nonprofit's statement of activities is issued instead of the income statement which is issued by a for-profit business which shows revenue such as contributions, program fees, membership dues, grants, investment income, and amounts released from restrictions. All these contributions are shown under the head revenues in the statement of activity.

NPO are those which have service motive and don't have any profit motive. examples - School, Hospital ,charitable organisation etc.

An advance receipt of subscription from a member of the non-profit organization is considered as a/an liability.

Subscription is the amount that is paid by members of NPO every year. It is the primary source of income for NPO. It is generally paid every month. It is the amount paid by members to keep their membership alive. An advance receipt of a subscription from a member is an income received in advance. So it is treated as a liability.

It is like donation. It is the amount given to a non-trading concern as per the will of deceased person. It is taken to the Receipts and Payments Account as Capital Receipts. This will appear in Balance Sheet on liability side.

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.

The capital fund of a nonprofit organization. Money is directed into the accumulated fund when revenues are greater than expenditures; money is directed away from the accumulated fund (withdrawn) when expenditures are greater than revenues.so, the equation in NPO is :- Accumulated fund + Liabilities = Assets

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,

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 these are called unrestricted net assets. Unrestricted contribution revenues (reported on the statement of activities) also cause the amount of unrestricted net assets to increase.

Hence, A nonprofit organization's assets that have been designated by its board of directors for a specific project should be reported on the external financial statements as unrestricted net assets.

Nongovernmental not-for-profit organizations are required to provide only Statement of financial position, statement of activities, and statement of cash flows as their external financial statement.

The statement of financial position is another name for the balance sheet. It is one of the main financial statements and it reports an entity's assets, liabilities, and the difference in their totals.

A nonprofit's statement of activities is issued instead of the income statement which is issued by a for-profit business.

The statement of cash flows for a nonprofit organization is similar to that of a for-profit business. It reports the organization's change in its cash and cash equivalents during the accounting period.