Question

1. List the 2 types of Not-for-Profit Entities and give an example of each.

2. Which type is the focus of the CPA Exam?

3. Who prescribes the accounting rules for Nongovernmental Not-for-Profits and VHWOs?

4. Which basis of accounting is used by nongovernmental not-for-profits and VHWOs?

5. Is Fund Accounting used by nongovernmental not-for-profits and VWHOs? If so, when is it appropriate to report on a fund basis?

6. What three categories of net assets are reported by nongovernmental not-for-profits and VHWOs?

7. Which user group imposes restrictions on resources?

8. GASB 35 applies to which nonprofits? List one of its requirements.

9. Nongovernmental Not-for-Profits and VHWOs report Expenses by function. List the two Functions presented.

10. Why is the aforementioned Expense classification required?

Answer 1

1.  Nonprofits provide a variety of services to the public, including feeding the homeless, tutoring children and providing scholarships.

Two type of Non profit organisations are

Public Charities:

BoardSource reports that most nonprofits in the United States are public charities. These organizations provide free and low-cost services, such as computer training for children and career workshops for the unemployed. They receive funding from the public through the government, individuals, corporations and foundations. Churches, libraries, museums, hospitals and private schools can qualify as public charity nonprofits. Many public charities host fundraisers to obtain additional funding to support their missions.

Professional and Trade Organizations:

According to the Society for Nonprofit Organizations, professional and trade organizations form to provide programs and services for a group of people in the same profession. The National Writers Union and the International Association of Meeting Planners would fall into this category. Although members pay dues to join these nonprofits, they also receive free and discounted classes and career training in their chosen fields.

2. Topics to be studied for CPA exam

1. Ethics, Professional and Legal Responsibility
2. Business Law
3. Federal Tax Process, Procedures, Accounting, and Planning
4. Federal Taxation of Property Transactions
5. Federal Taxation of Individuals
6. Federal Taxation of Entities

3. A. FASB -- Regulates the accounting and reporting practices for all "private" not-for-profit-organizations; GASB governs governmentally affiliated organizations.

B. "Private" NFPs -- Most not-for-profit organizations fall under this category; FAS 116 prescribes the rules for recognition of contributions and FAS 117 prescribes the external reporting requirements for all private NFP organizations;

Traditional reporting practices (Fund model) are still expected to be used for internal reporting

C. "Public" (governmentally affiliated) NFPs -- These organizations are predominantly publicly funded hospitals and universities, although museums, parks, and landmarks can fall into this category as well.

They use fund reporting in their independent statements, and for reporting purposes are usually combined with the primary government entity.

4. Accrual Basis of accounting is required

This includes calculation and recording of depreciation expenses and the financial statements report expenses not expenditures

5. Yes Many private non profit organisations use fund designations internally for book keeping purposes but the financial statements are on overall basis and do not make any reference to funds except in footnotes and supplementary schedules

6. The three categories of net assets provided by NPOs are

1. Unrestricted

2. Temporarily Restricted - Time or purpose restriction

3. Permanently Restricted

7. The restictions must be outside donor imposed restrictions i.e the persons who are donating to NPOs

9. The NPOs and VHWOs report expenses on the basis of functions like salaries, Depreciation, Supplies etc...

10. The purpose of this Functional expenses reporting is to show the details of the entity's spending on direct programme activities vs overheads i.e. supporting activities