Question

The newly established Environmental Council (a nongovernmental not-for-profit organization) uses two funds for internal reporting purposes. The general fund is used to record day-to-day operating transactions. A building fund is used to accumulate resources for a new building to house the Council’s operations. Both funds are reported using the accrual basis of accounting. In its first year, the Council engaged in the following transactions. Prepare a statement of revenues, expenses, and other changes in fund balances. Use a two-column format, one column for each of the Council’s two funds. Comment on the extent to which the statement of revenues, expenditures, and changes in fund balances measures the cost of services?

1.) It received cash contributions of $500,000. Donors stipulate that $100,000 of this amount must be used for the new building.

2.) It incurred operating payroll costs of $200,000, of which $180,000 is paid in cash.

3.) It earned $1,000 in interest (paid in cash) on investments restricted to the acquisition of the new building.

4.) It transferred $25,000 from its general fund to the building fund.

It paid $15,000 in fees (accounted for as expenses) for architectural drawings for the proposed building

Answer 1

1	It received cash contirbutions of $500,000. Donors stipulate $100,000 of this amount must be used for building
	cash	400000
	contribution revenue		400000
	(Record of contribution revenue- General fund)
	cash	100000
	contribution revenue		100000
	(Record of contribution revenue- Buidling fund)
2	It incurred operating payroll costs $200000 out of which 180000 is paid in cash
	Operating expenditures	200000
	cash		180000
	salaries payable		20000
3	it earned $1000 in interest paid in cash on investments
	Cash	1000
	Interest revenue		1000
	Record of interest revenue
4	It transferred general fund to the building fund
	Cash	25000
	Transfer in from general fund		25000
5	Expenses - Architectural fees	15000
	cash		15000
	(to record fees paid to architect)