Transcript
Statement of... ...Financial Position
...Activities ...Cash FlowsThese are the three financial statements required of not for profits
Statement ofFunctionalExpensesA VHWO also needs one of these. It tells the user what thecharity spends on program, administration, and fund raising.
NETASSETS
The equity section of the statement of financial positionis the net asset section. There are three categories ofnet assets
PERMANENTLYRESTRICTED
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Consists of endowments -assets that cannot be spent.
TEMPORARILYRESTRICTED:
TIME ORPURPOSE
These will be available at some point. A time restriction means that the assets is not available in thecurrent period. A purpose restriction means that assets are available only for specified activities.
RESTRICTIONSARE EXTERNAL
ONLY.Only an outside party can impose restrictions on assets. Management cannot imposerestrictions on the assets of the charity.
RESTRICTIONSDON'T
MATTERRestrictions are either time or purpose as stated earlier. Restrictions onassets received does not prohibit a charity from recognizing revenue.
CONDITIONSMATTER
Conditions are requirements that must be met before the charity hasaccess to contributed assets. The charity cannot recognize revenueuntil the requirements have been met.
PRESENTVALUE
Where time is an issue, assets and revenue are discounted topresent value and revalued every accounting period. The changein value is recorded as contribution revenue, not interest income.
SERVICES
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Donated services are revenue to the charity when provided by aprofessional.
Furthermore, the services must represent something that the charitywould have had to pay for otherwise.
For example - the services of a veterinarian to charity that focuses onanimals might be a donated service that qualifies for revenue
recognition. The services of volunteers that require no special trainingwould probably not qualify.
EXPENSESARE ALWAYS
UNRESTRICTEDYou can think of a charity as having three different sets of financial statements - one for each ofthe net asset categories. Revenue of a charity can fall in any of the three categories, but theexpenses will always be unrestricted. When restricted money is spent, a reclassification of netassets must be recorded - DEBIT Permanently Restricted or Unrestricted Net Assets, CREDITUnrestricted Net Assets.
FIXEDASSET
POLICYCharities can record fixed assets either as temporarily restricted or unrestricted. If they arerecorded as restricted, a reclassification must take place every time depreciation is recorded(expenses are always unrestricted).
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