ch21 accounting for NGO's

7/24/2019 ch21 accounting for NGO's

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21 - 12003 Prentice Hall Business Publishing,Advanced Accounting8/e,Beams/Anthony/Clement/Loensohn

Accounting for

Not-for-Profit Organizations

Chapter 21


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Learning Objective 1

Learn about the four main

categories of not-for-profit

organizations.


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Categories o! "ot-#or-Pro!it

$rgani%ations

&oluntary health an' el!are organi%ations

$ther not-!or-(ro!it entities

Health care entities

Colleges an' uni)ersities


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21 - *2003 Prentice Hall Business Publishing,Advanced Accounting8/e,Beams/Anthony/Clement/Loensohn

+he "ature o! "ot-#or-Pro!it

$rgani%ations

A not-!or-(ro!it entity

1. recei)es contributions o! resources !rom(ro)i'ers ho 'o not e(ect (ecuniary returns,

2. o(erates !or (ur(oses other than (ro!its,

an' 3. 'oes not (ossess onershi( interestslie those o! business enter(rises


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Learning Objective 2

Differentiate beteen governmenta!

an" nongovernmenta!

not-for-profit organizations.


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Classi!ication o! $rgani%ations

4o)ernmental not-!or-(ro!it organi%ations

"ongo)ernmental not-!or-(ro!it

organi%ations


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4o)ernmental "ot-#or-Pro!it

$rgani%ations

$!!icers are electe' by (o(ular )ote or

a((ointment by a state or local go)ernment

4o)ernments can unilaterally 'issol)e the entity

+he entity has the (oer to enact

an' en!orce a ta le)y+hey arespecial-purposego)ernments


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4o)ernmental "ot-#or-Pro!it

$rgani%ations

4A7B Statements No. 34an'No. 35

re8uire s(ecial (ur(ose go)ernments

ith more than one go)ernmental

(rogram or both go)ernmental

an' business-ty(e acti)ities to

(resent both go)ernment-i'ean' !un' !inancial statements


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"ongo)ernmental "ot-#or-Pro!it

$rgani%ations

+hese are "#P organi%ations that

lac the go)ernmental element:


Colleges an' uni)ersities$ther

Health care organi%ations


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Learning Objective #

$"entif% the accounting princip!es

app!icab!e to governmenta! an"

nongovernmenta! not-for-profit

organizations.


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"ot-#or-Pro!it Accounting

Princi(les

#A7B Statements No. 116an' 117

are a((licable to all nongo)ernmental

not-!or-(ro!it entities

#A7B Statements No. 14an' 135

are s(eci!ically relate' to

not-!or-(ro!it organi%ations


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#inancial 7tatements

#A7B Statement No. 117re8uires

that all "#P entities (ro)i'e:

7tatement o! #inancial Position

7tatement o! Acti)ities

7tatement o! Cash #los


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Classi!ication o! "et Assets

+hree Classes o! "et Assets

;nrestricte' +em(orarily


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21 - 1*2003 Prentice Hall Business Publishing,Advanced Accounting8/e,Beams/Anthony/Clement/Loensohn

7tatement o! #inancial Position

+he statement re(orts assets,

liabilities, an' net assets

Com(arati)e statements !rom

the (rior (erio' are not re8uire'


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+his (ro)i'es in!ormation

about the change in amountan' nature o! net assets

+he !ocus o! accounting isthe organi%ation as a hole


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=t re(orts increases in unrestricte'

net assets as re)enues an'

re(orts 'ecreases in unrestricte'

net assets as e(enses

+em(orarily restricte' or (ermanently

restricte' net assets consist o!

'onor- restricte' contributions


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4enerally, an organi%ation re(orts

re)enues an' e(enses at gross amounts

Peri(heral gains an' lossesare re(orte' at net amounts

$(tional classi!ications$(erating ornono(erating


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7tatement o! #unctional >(enses


must re(ort e(enses classi!ie' by!unction an' by natural classi!ication

+his statement is not re8uire' !or $"P$s


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Statement No. 117eten's the

(ro)isions o! #A7B Statement No. !5

to not-!or-(ro!it organi%ations

Statement No. 117encourages

"#P organi%ations to use

the 'irect metho'


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Contributions

Statement No. 116'e!ines a contri"ution

as ?an uncon'itional trans!er o! cash

or other assetsin a )oluntary,nonreci(rocal trans!er@

A (romise to gi)e is a ritten or oralagreement to contribute cash or

other assets to another entity


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onor-=m(ose'


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4i!ts o! Long-Li)e' Assets

;nrestricte';nrestricte'


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=n)estments an' =n)estment

=ncome

#nvestmentsare initially recor'e' at cost

Contribute' securities are

recor'e' at their !air maret )alue

=n)estment income is recogni%e' as earne'


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+ransactions

>change +ransactions

Agency +ransactions

4i!ts in in'


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Learning Objective &

$ntro"uce 'A() not-for-profit

accounting princip!es.


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Deasurement Princi(les

"#P organi%ations measure

contributions at !air )alue

=! the !air )alue o! the contribute' asset 'ecreases

signi!icantly beteen the (le'ge 'ate an' the

'ate the asset is recei)e', the 'i!!erence is

recogni%e' in the (erio' the 'ecrease occurre'


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Collections

Statement No. 116 encourages retroacti)e

ca(itali%ation o! collections o! ors o! art

=! collections are ca(itali%e', they are

recogni%e' as re)enues or gains


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#un' Accounting

Dany not-!or-(ro!it organi%ations continue to

use !un' accounting !or internal accounting


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Learning Objective *

App!% not-for-profit accounting

princip!es to vo!untar% hea!th

an" e!fare organizations.


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&oluntary Health an' Eel!are

$rgani%ations

&HE$s are su((orte' by an' (ro)i'e

)oluntary ser)ices to the (ublicDarch o! imes

4irl 7couts

American Cancer 7ociety

Deals on EheelsBoy 7couts


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Accounting !or &oluntary Health

an' Eel!are $rgani%ations

=n 200, "eighbors Hel(ing "eighbors "H".

'istribute' 'ecals to all resi'ents in the community

+he 'ecals cost "H" F1*

+he organi%ation recei)e' unrestricte' cash

contributions o! F*,000 an' uncon'itional

(le'ges o! F,000 F2,000 collectible in 200.


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Cash *,000

;nrestricte' 7u((ort G

Contributions *,000+o recor' cash contributions

>(enses G 7u((orting 7er)ices 1*

Cash 1*

+o recor' (ayment o! 'ecals


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Contributions


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$n anuary 1, 200, Dartin Construction

'onate' a use' )an to the organi%ation

+he #D& o! the )an is F1,00

+he )an has a three-year remaining use!ul li!e

i ! l l h


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>8ui(ment 1,00

+em(orarily (ense G Program

7er)ices G Community 7er)ice 00Accumulate' e(reciation 00

+o recor' 'e(reciation

A i ! l l h


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+em(orarily


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A !un'-raising ban8uet as hel'

7ales ere F90 an' relate'e(enses amounte' to F0

Ehat are the Iournal entriesJ

A i ! & l H l h


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Cash 90

;nrestricte' 4ains G 7(ecial >)ent 90

+o recor' (rocee's !rom a !un'-raising e)ent

;nrestricte' 4ains G 7(ecial >)ent 0

Cash 0

+o charge costs o! !un'-raising e)ent againstsu((ort !rom the e)ent


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$ther =ssues

4i!ts in in'

Dembershi( !ees

onate' securities an' in)estment income


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$ther =ssues

onate' ser)ices an' (ayment o! salaries

e(reciation

#ie' assets (urchase' ith restricte' resources


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$ther "ot-#or-Pro!it $rgani%ations

Cemetery associations 7ocial organi%ations

Ci)ic organi%ations

Libraries

Duseums

Political organi%ations


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Learning Objective +


princip!es to hospita!s an" other

hea!th care organizations.

A ti ! " t l


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Accounting !or a "ongo)ernmental

"ot-#or-Pro!it Hos(ital

Patient ser)ice re)enue

Premium !ees

$ther o(erating re)enues


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21 - **2003 Prentice Hall Business Publishing,Advanced Accounting8/e,Beams/Anthony/Clement/Loensohn

Patient 7er)ice


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Patient 7er)ice


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7tatement o! $(erations an' $ther

Hos(ital #inancial 7tatements

Balance 7heet

7tatement o! $(erations

7tatement o! Changes in "et Assets



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Learning Objective ,


princip!es to private not-for-profit

co!!eges an" universities.

P i t " t ! P !it C ll


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Pri)ate "ot-!or-Pro!it Colleges

an' ;ni)ersities

"ongo)ernment not-!or-(ro!it

colleges an' uni)ersities

a((ly the re8uirements o!7#A7s 11 an' 115

i ! i


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Accounting !or a Pri)ate

"ot-#or-Pro!it College or

;ni)ersity+uition an' !eesA((ro(riations !rom !e'eral,

state, an' local go)ernments

Contributions

7tu'ent !inancial ai'

>n'oments

7ales an' ser)ices


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>(enses

=nstruction


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>(enses

7tu'ent ser)ices

=nstitutional su((ort

$(eration an' maintenance o! (lant

7tu'ent ai'


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#inancial 7tatements

7tatement o!#inancial Position

7tatement o!Acti)ities

7tatement o!Cash #los


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n" of Chapter 21

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ch21 accounting for NGO's