SU (SelviaUtama): Financial in Non Profit Organization

Every nonprofit organization’s financial statements produced for external use should include four parts:

A balance sheet (sometimes called a statement of financial position),
An activities statement (sometimes called support, revenue, expenses and changes in net assets),
A cash flow statement, and
Explanatory footnotes.

Generally accepted accounting principles (GAAP), in Statement of Financial Accounting Standards No. 117, Financial Statement of Not-for-Profit Organizations (SFAS 117) issued by the FASB, requires that (in most cases) expenses of not-for-profit organizations be reported in three categories of activities: program, management and general, and fundraising (or, for a membership organization, membership development).

Other key aspects of interest to nonprofits are outlined by the Financial Accounting Standards Board (FASB), a nonprofit organization authorized by the Securities and Exchange Commission to set accounting standards in the United States. Of particular importance is the FASB’s Statement of Financial Accounting Standards No.116, which defines:

Revenue in the form of contributions: These standards establish how and when to recognize that revenue has been earned. They include standards for the accounting treatment of unrestricted and restricted funds, donated goods, in-kind contributions, pledges and the like.
Value of donated services: This establishes standards for when it is necessary to record donated services (i.e., volunteer time) in the organization’s financial statements. According to the FASB, services to be recognized include those that “(a) create or enhance nonfinancial assets or (b) require specialized skills, are provided by individuals possessing those skills, and would typically need to be purchased if not provided by donation.”

Tax Exemption

For-profit organizations must pay taxes on their net income, but this is not true for nonprofits if they are exempt from taxes. If a nonprofit's goal is to increase the welfare of society, governments tend to help this cause by minimizing the nonprofit's costs as much as possible. It is these differences between the two types of organizations that have an impact on each type's accounting methods.

Grant

Government grants are a common method for non-for-profit (NFP) organizations to obtain funding. Typically, these grants originate with the NFP submitting a proposal, to a governmental agency for specific funding. This proposal will often include a detail budget of how the grant funds are to be spent. As such, it is important that the NFP properly track and report its expenditures to ensure compliance with the grant agreement.

Many government grants also contain specific requirements the recipient must follow in order to fully comply with the grant. Although these requirements can cover a wide range a common requirement is the matching clause. This clause requires the NFP to contribute/raise a certain level of funds to the project. These funds can come from any source, other than another government grant.

Audit Process

There are essentially three stages to every audit – planning/pre-fieldwork, fieldwork, and post-fieldwork/wrap-up. In order for an audit to run smoothly and efficiently, all three phases need to be executed well.

It is inappropriate to prepare income statement for a non-profit organization since non-profit organizations don’t exist to make profit. Therefore, non-profit organizations prepare income and expenditure account as a substitute of income statement
The amount of total Revenues greater than the amount the total expenses of a non-profit organization is referred to as surplus (not net profit). Surplus is not distributed among the members of non-profit organization rather than it is kept for growth and expansion of the organization for example, non-profit organizations use surplus to buy fixed assets such as building for the club, land, equipments etc. - See more at: http://www.accounting-world.com/2013/01/accounts-of-non-profit-organizations.html#sthash.8WJm58bj.dpuf

e main purpose of business entities is to make profit as much as possible for the owner(s), whereas the non- profit organizations are established not to make profit but for the well-being of their members, society or general public - See more at: http://www.accounting-world.com/2013/01/accounts-of-non-profit-organizations.html#sthash.8WJm58bj.dpuf

Difference between non-profit organizations and profit oriented organizations - See more at: http://www.accounting-world.com/2013/01/accounts-of-non-profit-organizations.html#sthash.8WJm58bj.dpuf

The main purpose of business entities is to make profit as much as possible for the owner(s), whereas the non- profit organizations are established not to make profit but for the well-being of their members, society or general public - See more at: http://www.accounting-world.com/2013/01/accounts-of-non-profit-organizations.html#sthash.8WJm58bj.dpuf

Characteristics
Profit-Oriented OrganizationsNon-Profit Organizations
Main purpose is to make profit

Main purpose is Not to make profit
Sole proprietorship: Owned by a single owner
Partnership: Owned by partners
Company: Owned by the shareholders

No one owns a non-profit organization
Profit is distributed to shareholders or owner(s)
Not distributed but kept for growth and expansion of the organization

Main revenue source = Rendering services or selling goods

Main revenue source = Membership subscription

Tax is generally charged on net income
Tax Exemption in many countries - See more at: http://www.accounting-world.com/2013/01/accounts-of-non-profit-organizations.html#sthash.8WJm58bj.dpuf

dugan lopatka

nonprofit accounting basics

nonprofit answer guide

Chron