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ACC 407 Chapter 10 Quiz

Terms in this set (59)

Which organization has primary standard setting authority over private not-for-profit organizations?
FASB
What are the financial statements required for voluntary health and welfare organizations?
Statement of Financial Position
Statement of Activities
Statement of Cash Flows
Statement of Functional Expenses
Which of the following are the net asset classes for private not-for-profit organizations?
Permanently Restricted, Temporarily Restricted, Unrestricted
Which of the following is/are correct with respect to the reporting of expenses for a private not-for-profit?
Expenses are reported by function within two broad categories (program or supporting) in the Statement of Activities or in the notes.
What financial ratio is most commonly used to evaluate charitable organizations?
Program expenses / total expenses.
Which of the following statements is correct with respect to contributions to a private not-for-profit?
A.) Contributions, including unconditional pledges, to a not-for-profit are recorded at fair market value at the date of receipt.
B.) Contributions to a not-for-profit may be restricted as to purpose or time or for plant acquisition.
C.) both of the above
D.) Neither of the above
both of the above
Contributed services are recognized as revenue by a private not-for-profit when the service:
A.) Creates or enhances a non-financial asset (i.e. a building).
B.) Requires specialized skills, is provided by someone possessing those skills, and typically would be purchased if not provided by donation.
C.) either of the above
D.) neither of the above
Either of the above
A donor made an unconditional pledge in 2016 of $ 8,000 to a private not-for-profit organization with the intent to pay the cash in June 2017. The organization should:
Record the pledge as temporarily restricted revenue in 2016 and reclassify it to unrestricted in 2017.
The institution's governing board decided to create an endowment from unrestricted funds, this is called a(n) ________ and the funds are classified as ____________.
Quasi-endowment, unrestricted
Which of the following is true regarding the recording of unconditional pledges of support received by a not-for-profit organization.
A.) Multiyear pledges should be recorded at the present value of future collections.
B.) Contribution revenue should be reported net of an allowance for estimated uncollectible pledges.
C.) both of the above
D.) neither of the above
both of the above
GASB has authority over...
governmental related not for profits
these typically follow enterprise fund accounting
FASB has authority over...
Private not-for-profits
Characteristics of Voluntary Health and Welfare Organizations and other not-for-profits
Promotes general health and well-being of the public

Tends to operate mainly from grants and gifts
Ex: YMCA, United Way
Why were FASB statements 116 & 117 written?
to bring comparability between the financial reports of private colleges, hospitals, voluntary health and welfare organizations, and other not for profits
3 required statements
Statement of Financial Position
Statement of Activities
Statement of Cash flows
VHWO must also prepare...
Statement of Functional Expenses
recommended for other not for profits but not required
Accrual Basis vs. Fund Accounting
Accrual:
required to be used by not for profits
includes calculation and recording of depreciation
FS report expenses

Fund:
not for profits use fund accounting for fund designations on their books but FS are accrual basis and don't reference individuals funds unless in the notes
Statement of Financial Position
A & L not required to be designated at current and non current
Net assets (statement of financial position) are classified as?
unrestricted
temporarily restricted
permanently restricted
Accounting rules require contributions to be recorded when _________?
when promised not when collected
Statement of Activities
statement must distinguish changes in net assets that are permanently restricted, temp restricted, or perm restricted. restrictions must be outside donor imposed
Revenue vs. Support (statement of activities)
support: class of revenues limited to gifts such as contributions

exchange transactions, like sales of service, are labeled as "revenue"
On the statement of net position, where are restrictions reflected?
in the equity section under net assets
Statement of Activities: expenses vs. restrictions
expenses:
reported in unrestricted column
classify expenses as program or supporting services

restrictions:
temp. restricted resources must be 'released' or moved from the temp column to unrestricted as restrictions are satisfied
Revenues are classified into 3 categories, what are they?
unrestricted, temp restricted, permanently restricted
What are the two required categories of expenses?
program services and supporting services
When cash is spent according to donor's wishes, what occurs?
reclassify from temp restricted to unrestricted
Revenue - Expenses = ?
Change in Net Assets
Statement of Cash Flows
Operating, investing, and financing sections

businesses have the option to use direct or indirect approach plus a reconciliation.
Operating Section (statement of cash flows)
includes interest expense, interest revenue, and gains and losses are classified as operating
Investing section (statement of cash flows)
includes purchases or sales of fixed assets as well as purchases or sales of long-term investments
Financing section (statement of cash flows)
issuance of debt; repayments if principal of debt
Statement of Functional Expenses
matrix of expenses where the columns are the program or supporting activities and rows are the type of expenses.
Statement of functional expenses shows more detail than the ___________________ in regards to ______________________
activity statement; how expenses were allocated to program and supporting services
What is the purpose of the statement of functional expenses?
to show the details of the entity's spending on direct programs activities vs. overhead.

helps donors asses entity efficiency
FASB statement 116 requires __________________
contributions to be recognized as contribution revenue in the period received at their fair market value
Under accrual basis, unconditional pledges are recorded ____________
even before cash is received; record the receivable at the present value, net of allowance for estimated uncollectibles
Accounting for pledges- if there is expected to be an extended time before the gift is received record receivable at PV, then...
PV will increase as the expected date of receipt approaches. changes in PV are recorded as additional contribution rev. not interest.
When are contributed services recorded?
only if they create or enhance a nonfinancial assets

OR

require specialized skills, were provided by someone possessing those skills, and would have been purchased not donated.
If it is determined that contributed services should be recorded, how are they recorded?
if nonfinancial asset is enhanced:
DR property, plant, equipment
CR contributions revenue

otherwise:
DR expense
CR contributions revenue
Contributions are considered revenue when?
as soon as received even if the use if restricted
Pledges are recorded if ___________
unconditional
When are intentions to give recorded and why are they not legally enforceable?
not recorded until the actual gift materializes

the donor retains the legal right to change their mind
Fixed assets can be recorded as either ______________________
unrestricted assets or temporarily restricted

(if recorded as temp. restricted- depreciation must be recorded each year as unrestricted)
What is the most commonly used ratio for not for profits?
program expense ratio

program services expenses / total expenses
Program services include _______________________
expenses associated with performing the mission of the organization
Supporting services include _________________________
management and general/admin. ; fund raising and membership development
What does a high program expense ratio show?
it assures donors that the organization spends the bulk of dollars donated for its mission oriented activities rather than for overhead
How are salary and depreciation allocated between program and supporting expenses?
by using an equitable basis
What is the criteria to determine if the cost of a fund raising activity applies to program expenses?
purpose, audience, and content
SFAS 124
FASB requires investments with readily determinable market values to be recorded at fair values and gains and losses to be recognized
SFAS 136
assume a not for profit receives assets from a donor for distribution to a beneficiary
What is the accounting issue with SFAS 136
if cash or other assets are held by not for profit with instructions to release this money for specified parties, you must determine if it is a revenue or an agency relationship
If a not for profit agrees to transfer assets to a specified beneficiary, then...
the not for profit is deemed to be acting as an agent and a liability rather than a revenue is recorded
If a not for profit has the ability to redirect the assets to another beneficiary or if the not for profit and the beneficiary are related....
the assets are recorded as a contribution
Transfers of contributions to not for profits: something is revenue to a not for profit if...
they can control who gets the money
Reasons for a not for profit to have a profit?
to replace and expand equipment and facilities
to provide working capital
to retire debt
to continue programs beyond the time frame when see money grants are available
What are conditions?
unconditional- a recipient does not have an obligation

conditional- if you raise $100 a donor will match you
Conditions vs. Restrictions
Conditions- when you are going to record something

Restrictions- how you are going to record
THIS SET IS OFTEN IN FOLDERS WITH...