CCFC 513 Lecture Notes - Lecture 14: Retained Earnings, Net Income, Cash Flow
CHAPTER 12: ACCOUNTING FOR NOT-FOR-PROFIT ORGANIZATIONS
Handbook Part 3: Details any differences between for-profit organizations and not-for-profit
organizations
Definition of not-for-profit organizations
“Normally without transferable ownership interest” means no shares, no owners
- No shareholders’ equity
- There are net assets but not called shareholders’ equity
- No owners
When contributors give money to not-for-profit organization, the giver does not expect
anything in return
Basics of fund accounting
- Keep track separately of how much and what money came in or out based on the funds
being used
- Fund accounting = basically a bunch of subledgers
Accounting for contributions (2 methods available)
1. Deferral method
- Match revenues to expenses : recognize revenue when we incur expenses
- Endowment contributions are not shown on operating statement = they are NOT
revenue so there will never be expenses to match it
- Restricted contributions for future expenses are deferred
2. Restricted fund method
- Similar to regular accounting
- Match expenses to revenues: recognize expenses on the period revenue is recognized
Document Summary
Handbook part 3: details any differences between for-profit organizations and not-for-profit organizations. Normally without transferable ownership interest means no shares, no owners. There are net assets but not called shareholders" equity. When contributors give money to not-for-profit organization, the giver does not expect anything in return. Keep track separately of how much and what money came in or out based on the funds being used. Fund accounting = basically a bunch of subledgers. Accounting for contributions (2 methods available: deferral method. Match revenues to expenses : recognize revenue when we incur expenses. Endowment contributions are not shown on operating statement = they are not revenue so there will never be expenses to match it. Restricted contributions for future expenses are deferred: restricted fund method. Match expenses to revenues: recognize expenses on the period revenue is recognized. Any fair value increment/decrement (fvi/fvd) is amortized straight-line. What is the net book value of the company available to the common shareholders.