Accounting For Government and Not-For-Profit Organizations

ACCOUNTING FOR GOVERNMENT AND NOT-FOR-PROFIT ORGANIZATIONS
ACCOUNTING FOR GOVERNMENT AND

NON-PROFIT ORGANIZATIONS
Compiled by:
JERRY A. CALAYAN
2021
Module 4
NON-PROFIT ORGANIZATIONS
Overview
A non-profit organization is a group or institution organized for purposes other than generating
profit. Non-profit organization (NPO) is also called Non- Government Organizations (NGO) or
Nor-for-Profit Organizations (NFPO). A non-governmental organization (NGO) is a non-for-
profit, voluntary citizens’ group, which is organized on a local, national or international level to
address issues in support of the public good. (UNDP definition) Nonprofit organizations exist to
pursue missions that address the needs of society. This institutions depends on funds from
contributions, membership dues, program revenues, fundraising events, public and private
grants. The contributions or investments does not earn income and do not have commercial
owners.
NPO’s can take the form of a corporation, an individual enterprise (for example, individual
charitable contributions), unincorporated association, partnership, foundation (distinguished by
its endowment by a founder, it takes the form of a trusteeship), or condominium (joint
ownership of common areas by owners of adjacent individual units incorporated under state
condominium acts).
Non-profit organizations must be designated as nonprofit when created and may only pursue
purposes permitted by statutes for non-profit organizations. Non-profit organizations include 2
churches, public schools, public charities, public clinics and hospitals, political organizations,
legal aid societies, volunteer services organizations, labor unions, professional associations,
research institutes, museums, and some governmental agencies.
In the Philippines, not-for-profit organizations (NPOs) are typically organized as "non-stock

corporations" registered under the Corporation Code. This non-stock corporations are in the
form of charitable, religious, educational, professional, cultural, fraternal, literary, scientific,
social, civic service, or similar purposes, such as trade, industry, agricultural and similar
chambers, or any combination thereof
Securities and Exchange Commission (SEC) of the Philippines is the government regulatory
body for this organizations which serves as the registration authority. Other non-stock
corporations register as foundations. (Revised Corporation Code Section 87).
The basic concepts to nonprofit organizations for accounting and reporting are required by the
Financial Accounting Standards Board (FASB).
Businesses are organized to generate profits, nonprofits are organized to address the needs of
the society. With this, nonprofit organization prepares and issue a Statements of
Activities instead of the income statement normally prepared by for-profit businesses.
Since nonprofits do not have owners, there is no owner's equity or stockholders' equity and
there cannot be distributions to owners.
The World Bank also describes non-government organizations (NGOs) as:

“…include many groups and institutions that are entirely or largely independent of government
and that have primarily humanitarian or cooperative rather than commercial objectives. They
are private agencies in industrial countries that support international development; indigenous
groups organized regionally or nationally; and member-groups in villages. NPOs include
charitable and religious associations that mobilize private funds for development, distribute
food and family planning services and promote community organization. They also include
independent cooperatives, community associations, water-user societies, women’s groups and
pastoral associations. Citizen groups that raise awareness and influence policy are also NPOs”
Module Objectives:
After thorough discussion of the topics, the learner will be able to:
 Define and cite the characteristics of a not-for-profit organization
 Compare government agencies with not-for-profit organizations
 Define the different classification of funds.
 Identify the accounts used in an NPO
 Identify the different classification of net assets
 Journalize typical transactions of an NPO
 Prepare financial statements for not-for profit organizations
 Present actual financial statements and compare with the concepts learned during the
3 classroom discussion
There are five structural-operational features that defined organizations within the NPO sector
as follows:
• Organized - they have some structure and regularity to their operations, whether or not they
are formally constituted or legally registered. More than legal or formal recognition, this
qualification stresses organizational permanence and regularity, reflected in regular meetings,
a membership, and legitimate decision-making structures and procedures.
• Private, - they are not part of the apparatus of the state, even though they may receive
support from governmental sources.
• Not profit-distributing - they are not primarily commercial in purpose and do not distribute
profits to a set of directors, stockholders, or managers. While NPOs may generate a surplus
from time to time, they must reinvest these resources back into the objectives of their
respective organizations.
• Self-governing - they have their own mechanisms for internal governance, are able to cease
operations on their own authority, and are fundamentally in control of their own affairs.
• Voluntary - membership or participation in them is not legally required or otherwise

compulsory.
The structural-operational features that defined the NPO
This fivefold definition encompasses organizations both formal and informal, religious and
secular, those with paid staff and those staffed entirely by volunteers and organizations
performing expressive functions (i.e., advocacy, cultural expression, community organizing,
environmental protection, human rights, religion, representation of interests, and political
expression) as well as those performing service functions (i.e., provision of health, education
and welfare services). This description does not take into account individual forms of citizen
action such as voting or writing to legislators, but it embraces most organized forms, including
social movements and community-based cooperatives serving solidarity objectives.
Government agencies, private businesses, commercial cooperatives and mutual have been
deliberately excluded.
NPOs as a Sector
The UNDP2 describes NPOs as the “third sector”, the first and second being the government
and private sectors. This is in recognition of the distinct characteristics of NPOs from other
forms of organization especially from the commercial ones. Several studies reveal that NPOs 4
contribute significantly to the development of society and the economy.
In many countries, accounting pronouncements cater to the needs of commercial

organizations. Although fundamental accounting principles apply to any type of organization,
appropriate standards and guidelines for NPOs are needed to fit the specifications and
peculiarities of these organizations. Basic differences between commercial organizations and
NPOs include the following:
1) NPOs do not operate primarily for profit but for specific needs of a community, group,
organization or its membership.
2) Most of NPOs revenues come from funds contributed, donated, granted or given as
other forms of support. Revenues from income generating activities, if any, are
eventually plowed back to program operations.
Unlike in the business community where an exchange transaction occurs, in nonprofit

organizations, resource providers do not expect to receive either repayment or economic
benefits proportionate to the resources provided. There is no defined ownership interest that
can be sold, transformed or redeemed or that convey entitlements to a share to a residual
distribution of resources in the event that the organization is dissolved.
3) NPOs have the responsibility to account for these funds designated for a specific
purpose for a specified period of time. The nature of the revenues received requires
ensuring that separate types of funds are properly tracked and reported.
NPO Governance and Accountability

For NPOs to fulfill their goals and objectives as well as to realize stakeholders’ expectations
efficiently and effectively, they must be governed by the principles of Fairness, Accountability,
and Transparency. Fairness - rights of stakeholders should be observed and respected;
Accountability - Board and management should be answerable on their performance to
stakeholders; Transparency - timely, accurate and sufficient information must be disclosed.
The foremost responsibility for NPOs is to be accountable to the needs and aspirations of the
community it is working with since serving community interests is the stated primary goal of
most NPOs. In practice, these communities lack mechanisms for holding NPOs accountable.
Unlike donors, communities cannot withdraw their funding; unlike governments, they cannot
impose conditionalities.
NPOs are also accountable to its donors, who may be both external (for example,
governments, foundations, or other NPOs) and internal (members who contribute smaller
5 amounts). The simplest level of responsibility is that of spending money for the purpose to
which it has been designated.
Lastly, NPOs are also accountable to its organization. They are responsible to their stated
mission, governing board, management and staff, partners, and to the NPO community as a
whole.
Financial accounting in NPOs, the topic of this guide, hopes to contribute significantly to
helping NPOs increase their capacity to express accountability to their different stakeholders.
Basic differences between commercial organizations and NPOs include the following:
1) NPOs do not operate primarily for profit but for specific needs of a community, group,
organization or its membership.
2) Most of NPOs revenues come from funds contributed, donated, granted or given as
other forms of support. Revenues from income generating activities, if any, are
eventually plowed back to program operations.
3) NPOs have the responsibility to account for these funds designated for a specific
purpose for a specified period of time. The nature of the revenues received requires
ensuring that separate types of funds are properly tracked and reported.
Unlike in the business community where an exchange transaction occurs, in nonprofit

organizations, resource providers do not expect to receive either repayment or economic
benefits proportionate to the resources provided. There is no defined ownership interest that
can be sold, transformed or redeemed or that convey entitlements to a share to a residual
distribution of resources in the event that the organization is dissolved.
Figure 1 Table compares the main financial statements of a nonprofit organization (NPO) with
those of a for-profit corporation
NON PROFIT ORGANIZATION FOR PROFIT CORPORATIONS

Statement of Financial Position Statement of Financial Position /Balance
Sheet
Statement of Activities Income Statement
Statement of Functional Expenses (by
Function and Nature)
Statement of Cash Flow Statement of Cash Flow
Notes to Financial Notes to Financial
Statements Statements
Statement of Financial Position
A nonprofit's statement of financial position is similar to a balance sheet that reports the 6
organization's assets and liabilities, but since this is a nonprofit organization there is no
owner's equity or stockholders' equity but as Net Assets.
The primary purpose of NPO is to provide programs that meet certain needs of society thru its
various activities, thus it issues Statement of Activities. The statement of activities reports
revenue and expense that is presented in accordance with the two classifications of net assets
 With Donors Restrictions
 Without Donor Restrictions
The net assets section of a nonprofit's statement of financial position requires at a minimum

the following:
Net assets
Without donor restrictions Â xxx
With donor restrictions xxx
Total net assets xxx
These classifications are based on the restrictions made by the donors at the time of their
contributions.
1. Net assets without donor restrictions

If a donor does not specify a restriction on his or her contribution, the amount received by the
nonprofit is recorded as an asset and as contribution revenues. Unrestricted contribution
revenues (reported on the statement of activities) also cause the amount of net assets without
donor restrictions to increase.
When the board of directors designates some of the nonprofit's unrestricted assets for a
specific purpose, those assets must continue to be reported as net assets without donor
restrictions.
2. Net assets with donor restriction
When a nonprofit organization receives contribution that have donor-imposed restrictions, the
amount is normally recorded as an asset and as donor restricted contribution revenues.
Donor-restricted contribution revenues are reported on the statement of activities.
Statement of Activities
The statement of activities reports revenue and expense amounts in accordance with to the
two classifications of net assets illustrated in the Net asset. Below is an outline of the
statement
Components of Statement of Activities:
 Contributions
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 Membership dues
 Program fees
 Fundraising events
 Grants
 Investment income
 Gain on sale of investments
 Reclassifications when net assets are released from restrictions (a negative amount in
the With Donor Restrictions column and a positive amount in the Without Donor
Restrictions column)
Under the accrual method of accounting, revenues are reported in the accounting period in
which they are earned. In other words, revenues might be earned in an accounting period that
is different from the period in which the cash is received.
Reported Expenses and Losses
Expenses are reported according to

1. Program functions
2. Support functions
1. Program functions
Program expenses (or program services expenses) are the amounts directly incurred by the
nonprofit in carrying out its programs. For instance, if a nonprofit has three main programs,
then each of the three programs will be listed along with each program's expenses.
2. Supporting functions
Support expenses are reported in two subgroups:
 Management and general

 Fundraising and development
In order to accurately report the amount in each of these subgroups, it may be necessary to
allocate some management and general salaries to fundraising based on the time spent by
employees performing fundraising activities.
A nonprofit's transactions are recorded in accounts in the general ledger. A listing of the titles
of the general ledger accounts is also known as the chart of accounts.
The accounts in the general ledger and in the chart of accounts are organized as follows:
 statement of financial position accounts

o asset accounts
o liability accounts
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o net asset accounts
 statement of activities accounts
o revenues and gains
o expenses and losses
The number of accounts in a nonprofit's general ledger accounts depends on the number of
programs that the nonprofit has, the types of revenues it earns, and the level of detail required
for planning and control of the organization.
The Statement of Functional Expenses
The statement of functional expenses is reported in a matrix form to report expenses by their
function such as programs, management and general, fundraising and by the nature or type of
expense such as salaries, rent e t c…
The FASB now requires every nonprofit to present expenses by function and nature in one
place (statement or notes).
The Statement of Cash Flows
The statement of cash flows of a nonprofit organization is similar a for-profit business. This
reports the change in the cash and cash equivalent during the accounting period.
The statement of cash flows consists of three sections:
1. net cash from operating activities

2. net cash from investing activities
3. net cash from financing activities
The operating section reports the changes in cash other than those reported in the investing
and financing sections.
The investing section of the statement of cash flows reports the amounts spent to purchase
long-term assets such as equipment, vehicles and long-term investments. The investing
section also reports the amount received from the sale of long-term assets.
The financing section of the statement of cash flows reports the amounts received from
borrowings and also any repayments.
While the statement of cash flows, or cash flow statement, may be a bit difficult to prepare, it is
an important financial statement to be read.
The Notes to the Financial Statements

The notes to the financial statements are an integral part of all the statements prepared by an
NPO - the statement of financial position, the statement of activities, and the statement of cash
flows. The Accounting Standards Update No. 2016-14 requires important additional disclosures
regarding liquidity, restrictions, for creditors, donors, and among others.
Users and their Information Needs as applied to NPOs
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EXTERNAL USERS
a. Donors/Grantors/Funding Agencies
- Degree of attainment of development objectives as indicated in financial statements
and reports.
- Degree of compliance with agreed amount and manner of using funds.
- Degree of compliance with prescribed financial accounting and reporting system and
procedures
b. Creditors (Banks/Financing Institutions)
- Information on ability to pay as indicated by ratios of solvency, liquidity, and stability
as well as status of their security.
c. Government Agencies
- Compliance with laws, government rules and regulations, payment of taxes (if any)
and reportorial requirements
d. General Public
- Effect of the activities of NPOs to the community and society in general
INTERNAL USERS
a. Members
- Information on how fees, donations, grants, and proceeds from fundraising activities
were used.
- O ther information needs such as managerial remuneration, use of assets,
management efficiency, etc.
b. Management Team
- Board of directors/trustees for policy-making, strategic decision-making, and fulfilling
its trusteeship/stewardship role.
Objectives of Financial Reporting
The primary objective of financial reporting by NPOs is to provide information about the
financial position, performance, and cash flows of the organization that is useful, and indeed,
necessary, for a wide range of users to engage in informed decision making.
Financial reporting prepared for this purpose meets the common needs of most users.
However, financial reporting does not provide all the information that users may need to make
decisions since they mostly portray the financial effects of past events. 10
Financial reporting also shows the results of the stewardship of management for the resources
entrusted to it. Those users who wish to assess the stewardship or accountability of
management do so in order that they may make sound decisions.
The financial reports of NPOs should complement other non-financial, performance reports.
The financial reporting is the means by which the information gathered and presented in
financial accounting is regularly communicated to those who use it.
Basis of Accounting
The basis of accounting affects the timing of recognition of income and expenses.
When a cash basis of accounting is used, income is recognized once it is received while
expense is recognized once it is paid. On the other hand, using an accrual basis means that
income is recognized when it is earned, even when it has not yet been received, and expenses
are recognized when they are incurred even when they have not yet actually been paid.
The basis of accounting used, as discussed and summarized above, affects the presentation of
the financial statements of the organization. In cash basis, a transaction is recorded only when
actual cash has been received or spent. Basically, only the movement of cash can constitute a
transaction. Under this basis of accounting, funds are recognized as receipts for the period if
these are actually.
Exemption
In some countries, cash basis of accounting is allowed or required by local laws for NPOs. In
such cases, NPOs may use the cash basis.
Assumption of Going-Concern
The financial statements are normally prepared on the assumption that an NPO is a going
concern, and will continue to be in operation for the foreseeable future. It is thus assumed that
the NPO has neither the intention nor the need to liquidate or scale back its operations; if such
an intention or need exists, the financial statements may have to be prepared using a different
basis, in which case, this basis should be disclosed.
There are instances where an NPO is established ad hoc or its existence is limited to a specific
period. In this case, the management of an ad hoc NPO should properly disclose its nature and
terms of existence, as well as the implications of its ad hoc nature on its financial statements.
Qualitative Characteristics of Financial Statements

11 These are the attributes that make the information in financial statements useful to various
NPO stakeholders, who are the users of the information. An essential quality of the information
provided is its understandability by users.
a. Relevance. Information has the quality of relevance when it influences the decisions of
users by helping them evaluate past, present or future events or confirming, or
correcting their past evaluations.
1. Materiality. Information is material if its omission or misstatement could influence the

decision of users taken on the basis of the financial statements.
2. Timeliness. Accounting information must be available on time when needed if it is to

influence decisions. Lack of timeliness reduces relevance.
b. Reliability. Information is reliable when it is free from material error and bias and can
be depended upon by users to embody faithfully the representation contained therein.
1. Faithful Representation. To be reliable, information must represent faithfully the

transactions and other events that it either purports to represent or could reasonably be
expected to represent.
2. Substance over form. Transactions and other events are accounted for and presented
in accordance with their substance and not merely their legal form.
3. Neutrality. Information must be free from bias. Financial statements are not neutral if,
by selection or presentation of information, they influence the making of a decision or judgment
in order to achieve a predetermined result or outcome.
4. Prudence. Some degree of caution in the exercise of the judgments needed in making
the estimates required under conditions of uncertainty, such that assets or revenues are not
overstated and liabilities or expenses are not understated.
5. Completeness. Information must be complete within the bounds of materiality.

Omission may cause information to be false or misleading and thus unreliable and deficient in
terms of its relevance.
c. Comparability. Users must be able to compare the financial statements through time in
order to identify trends in its financial position and d. Understandability. An essential
quality of the information provided in financial statements is that it is readily
understandable by users.
Balance between Qualitative Characteristics

In practice, a balancing, or trade-off, between qualitative characteristics is often necessary.
Generally, the aim is to achieve an appropriate balance among the characteristics in order to 12
meet the objective of financial statements. The relative importance of the characteristics in
different cases is a matter of professional judgment.
Fair Presentation
Financial statements are frequently described as a fair presentation of an organization’s
financial position, performance, and changes in financial position. Although this framework
does not deal directly with such concepts, the application of the principal qualitative
characteristics and of appropriate accounting standards normally results in financial statements
that convey what is generally understood as presenting fairly such information.
Accounting procedures peculiar to specific types of NPOs
The principles that we have discussed so far apply to all types of NPOs. In this section, we will
discuss accounting procedures unique to specific types of NPOs. For this purpose, we will
subdivide NPOs into the following:
1. Health Care Organizations

2. Private, non-profit, Colleges and Universities
3. Voluntary Health and Welfare Organizations
4. Other non-profit organizations
Health Care Organizations

Health Care Organizations include hospitals, clinics, medical group practices, individual
practice associations, individual practitioners, emergency care facilities, laboratories, surgery
centers, other ambulatory care organizations, continuing care retirement communities, health
maintenance organizations, home health agencies, nursing homes, and rehabilitation centers.
In accordance with the “AICPA Audit and Accounting Guide, Health Care Organizations,” the
following are the accounting requirements unique to health care organizations:
1. Components of a complete set of financial statements

2. Presentation of revenues in the statement of operations
3. Presentation of contributions in the statement of operations
4. Disclosure of performance indicator
Financial statements of a health care organizations
According to the “AICPA Audit and Accounting Guide, Health Care Organizations,” health care
organizations shall prepare the following statements:
a. Statement of financial position

b. Statement of operations (in lieu of a statement of activities)
c. Statement of changes in net assets
d. Statement of cash flows, and
e. Notes to the financial statements.
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Presentation of revenues in the statement of operation
Revenues in the statement of operations are classifies into the following:
a. Net patient revenue – gross patient service revenue less contractual adjustments,
employee discounts and billed charity care.
b. Premium revenue – results from capitation agreements
c. Other revenues – all other revenues not classifiable as net patient revenue or premium
revenue.
Contractual adjustments
A portion of a hospital’s revenue is collectible from third-party payors, such as the Philippine
Health Insurance Corporation (PhilHealth) and other health insurance providers. In this regard,
a contractual adjustment may arise from the reimbursement agreement.
A contractual adjustment is the difference between what the hospital considers a fair price for
a service rendered versus an agreed upon amount for the service with the insurance company.
For example, the hospital may consider P60,000 a fair price for a service but agrees with
PhilHealth to accept only P58,000. The difference of P2,000 represents the contractual
adjustment which is written off as a direct reduction to patient service revenue.
Employee discounts
These are special discounts available only to the NPO’s employees (and their immediate family
members) in the form of reduction in the price of patient services. Employee discounts are
accounted for as direct reduction to patient service revenue.
Charity care
Charity care pertains to free services rendered to patients. Charity care is not recognized but
rather disclosed only in the notes.
Capitations agreements
Capitations Agreements are agreements with third parties based on the number of
employees instead of services rendered. SFAS No. 117 requires revenues from capitation
agreements to be shown separately on the statement of operations under the caption
“Premium revenue,” which is a line item below net patient revenue.
Other revenues
Other revenues consist of revenues other than patient service revenues and premium
revenues. Examples are the revenues from the hospital’s pharmacy, parking deck, flower and
gift shop, educational programs, donated materials and services.
Presentation of contributions in the statement of operations
Unlike for other NPOs, health care organizations do not present restricted contributions on 14
the statement of operations as part of revenues. The revenues discussed above (i.e., net
patient service revenues, premium revenues, and other revenues) pertain only to
unrestricted revenues and may include revenues from unrestricted contributions. Revenues
from unrestricted contributions may be separately indicated as such or included in the other
revenues classifications.
Revenues from restricted contributions are presented separately at the bottom part of the
statement of operations, after unrestricted revenues and expenses.
Disclosure of performance indicator
According to the AICPA Guide, the statement of operations shall provide a performance
indicator, such as operating income, revenue over expenses, etc. The policy used in
determining the performance indicator shall be disclosed in the notes.
Unrealized gains and losses on investments in securities are not a part of the performance
indicator, but shall be reported on the statement of operations after the performance indicator.
Private, non-profit, Colleges, and Universities
The accounting procedure that is unique to private, non-profit, colleges and universities is the
accounting for scholarships and fellowships. The concepts are provided below:
a. Scholarships and fellowships granted freely are treated as direct reduction of

revenues from tuition and fees, e.g., academic scholarship.
b. Scholarships and fellowships granted as compensation for services rendered by the
grantee are treated as expenses , e.g., academic scholarships provided to student
assistants and faculty members or their dependents,
c. Refunds of tuition fees from class cancellations and other withdrawal of enrolment are
treated as direct reduction of revenues from tuition and fees.
Voluntary Health and Welfare Organizations
Voluntary Health and Welfare Organizations (VHWO) are non-profit entities that derive their
revenues primarily from donations from the general public to be used for purposes connected
with health, welfare, or community services. Examples include: women and children’s health
and welfare societies, human rights advocates, environmental protection organizations,
religious organizations, museums and other cultural and arts societies, libraries, research and
scientific foundations, professional associations, private elementary schools, social clubs, and
fraternal organizations.
Other non-profit organizations
Other general accounting requirements for NPOs apply to other non-profit organizations. Thus,
there are actually no accounting requirements peculiar to these organizations.
Sample Financial Statements
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To present examples of the statement of financial position and the statement of activities we
will follow the activities of Almost Family a nonprofit organization called a daytime shelter for
adults.
Let's assume that Almost Family a Not for Profit Organization was incorporated in January
2019 and its accounting years end on each December 31. The following transactions occurred
during a three-month period.
Transaction 1. On January 31, a donor contributes P100,000, without restriction, for the
operation of Almost Family. This transaction affects the general ledger accounts as follows:
January 31, Cash – general 100,000

Revenues: Contributions General 100,000
Transaction 2. On February 1, rents office space and paid with A check for P2,000. This
covers a one-time security deposit of P1,000 plus the February office rent of P1,000.
February 1, Security Deposit 1,000
Rents Expense 1,000
Cash General 2,000.
Transaction 3. On February 2, a P400 check is written to the utility as a one-time security

deposit for electricity and heat service.
February 2 Security Deposit 400

Cash General 400.
Transaction 4. On February 19, Almost Family receives a contribution of P8,000 that the
donor specifies must be used for the purchase of furniture. The contribution is deposited into a
money market account. This transaction affects the general ledger accounts as follows:
February 19
Money Market Account- Donor Restricted 8,000
Revenues: Contributions with Donor Restrictions 8,000
Transaction 5. The electricity and heating invoice has not arrived. It is estimated that the
amount for February's usage was P350, so the following accrual adjusting entry is recorded on
February 28:
February 28
Electricity and Water expenses 350
Accrued Expenses 350
Almost Family
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February 28, 2019
Cash and Cash 15,600.0

equivalents P 0 Accrued Expenses P 350.00
Security Deposits 1,400.00 Net Assets

- Without Donors
Furniture Restrictions 8,650.00
With Donors Restrictions 8,000.00
16,650.0
Total Net Assets 0
17,000.0 Total Liabilities and Net 17,000.0

Total Assets P 0 Assets P 0
Almost Family
For two months ended February 28, 2019
Without Donors With Donors Total

Restrictions Restrictions
Revenue: P 10,000.00 8,000.00 18,000.00

Contributions
Expenses:
Program Expenses -
Gen. Admin. Expenses 1,350.00 1,350.00
Fund Raising Expenses
Change in Net Assets - 1,350.00 8,000.00 16,650.00

Net Asset- beginning
Net Asset -ending 8,650.00 8,000.00 16,650.00
Note that the ending net assets amount must be the same amount on the net assets reported in the Statement of
financial position on the same period
During March, Almost Family paid the March rent of P1,000. Almost Family also paid the
February utilities which were equal to the estimated amount of P350. Almost Family estimates
that March's utilities will be P300.
On March 31, Almost Family paid P8,300 to purchase furniture (using the donor-restricted
donation of P8,000). The statement of financial position dated March 31 will report the following
amounts:
Almost Family
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March 31, 2019
Cash and Cash

equivalents 5,950.00 Accrued Expenses 300.00
Security Deposits 1,400.00 Net Assets
- Without Donors 15,350.0

Furniture 8,300.00 Restrictions 0
Total Net Assets
15,650.0 15,650.0
Total Assets 0 Total Liabilities and Net Assets 0
Almost Family
Statement of Activities
March 31, 2019
Without Donors With Donors Total

Restrictions Restrictions
Revenue: P
Contributions 8,000.00 - 8,000.00 -
Net asset released fr Restriction 8,000.00 - 8,000.00 -
Expenses:
Program Expenses -
Gen. Admin. Expenses 1,300.00 1,300.00
Fund Raising Expenses
Total Expense 1,300.00 1,300.00
Change in Net Assets 6,700.00 - 8,000.00 - 1,300.00
Net Asset- beginning 8,650.00 8,000.00 16,650.00
Net Asset -ending 15,350.00 - 15,350.00
Note that the ending net assets amount must be the same amount on the net assets reported in the Statement of
financial position on the same period
Definition of Terms
Unrestricted – available for immediate use and for any purpose.
Temporarily restricted – restricted by the donor in such a way that the availability of the
contribution for the NPO’s use is dependent
Organized, i.e., they have some structure and regularity to their operations, whether or not they
are formally constituted or legally registered. More than legal or formal recognition, this
qualification stresses organizational permanence and regularity, reflected in regular meetings, 18
a membership, and legitimate decision-making structures and procedures.
Private, i.e., they are not part of the apparatus of the state, even though they may receive
support from governmental sources.
Not profit-distributing, i.e., they are not primarily commercial in purpose and do not distribute
profits to a set of directors, stockholders, or managers. While NPOs may generate a surplus
from time to time, they must reinvest these resources back into the objectives of their
respective organizations.
Self-governing, i.e., they have their own mechanisms for internal governance, are able to
cease operations on their own authority, and are fundamentally in control of their own affairs.
Voluntary, i.e., membership or participation in them is not legally required or otherwise
compulsory.
NPO – include many groups and institutions that are entirely or largely independent of
government and that have primarily humanitarian or cooperative rather than commercial
objectives.
Program services – are the activities that result in goods and services being distributed to
beneficiaries, customers, or members that fulfill the purposes or mission for which the
organization exists. Those services are the major purpose for and the major output of the
organization and often relate to several major programs.
Supporting activities – are all activities other than program services. Generally, these include
management and general, fund-raising, and membership-development activities.
Read:
IFRS 15
Republic Act 11232, or the Act Providing for the Revised Corporation Code of the Philippines,
FASB issued Accounting Standards Update (ASU) No. 2016-14 for Not-for-Profit
NGOs Act RA 10693
Tax Code Section 30(e), (g), and (h)).
Revenue Memorandum Order 20-2013 Section 5(b))
ACTIVITIES / ASSESSMENT
1. Explain the applicability of the PFRSs to NPOs.

2. Account for the assets, liabilities, equity, revenues and expenses of NPOs.
3. Enumerate and describe the financial statements of NPOs.
19 4. State the accounting procedures peculiar to specific types of NPOs.
EXERCISES
1. A nongovernment organization receives P 40,000 of unconditional promise to give with no donor-

imposed restrictions. Of this amount P28,000 is due during the current period and P12,000 is due
in the next period. The organization estimates that 3% of the pledged will be uncollectible.
Required: Prepare journal entries to record the pledges and indicate the effect that the pledges will
have on the net assets classifications.
2. In January 2020 Mr. X donated a van to Bantay Bata Foundation. The van has a fair value of
P250,000 and a remaining life of 8 years, with no salvage value. No restrictions are imposed on the
use of the van, either by Mr. X or the Bantay Bata Foundation. Also in 2020, a church donated
P20,000 to the Bantay Bata foundation that is restricted for the purchase of equipment. The money
was invested that earned a 5% interest. Accrued interest on the investment totaled P1,500 on
December 31,2020. The income from investment is also restricted for the purchase of equipment.
Required: Prepare journal entries for these transaction in 2020. Discuss the effect on net the asset
classifications and the financial statements.
3. At the beginning of 2020 the residents of Barangay Pag-asa organized a voluntary health and
welfare organization called May Bukas Pa (MBP). MBP receives cash donation, and nonperishable
groceries, and household items from contributors. The groceries and household items are
distributed free of charge to families on the basis of need. MBP allocates expenses 80% to
community services and 20% to management and general services, unless otherwise noted.
MBP has paid one administrator with a yearly salary of P 36,000. An accountant donates his
accounting services with a fair value of P15,000 and are allocated to management and general.
Work is also done by regular volunteers whose services cannot be measured. A local resident has
provided free warehouse space for the operation of MBP. Fair value of rent for the space is
P36,000 a year. Utilities of P 72,000 are paid in 2020.
During the year MBP purchased supplies for P3,000. At December 31, 2020, the supplies inventory
was insignificant. Expenses incurred in determining which families were eligible for MBP,s services
and other accounting and reporting expenses totaled P18,000. Donated assets for 2020 included
nonperishable groceries with a fair value of P120,000 and household items with a fair value of
P80,000. During the year, three fourth of the groceries and half of the household items was
distributed. No portion of these distributions was allocated to management and general services.
In addition to the donated assets, MBP received cash donations of P 60,000 and pledges of
P120,000. MBP estimated that 10% of the pledges would be uncollectible. At year end
P 45,000 of the pledges had been collected. MBP estimates that only P 3,000 of the
remaining pledges will be uncollectible. Town council of the Barangay PAG-ASA made a
P50,000 grant to MBP that will be paid in January 2021.
Required: Prepare a summary entry for MBP for the year 2020.
4. The following information was taken from the accounts and records of ABC Foundation, a
Private, not- for -profit organization. All balances are as of December 31, 2020, unless
otherwise noted.
Unrestricted Support- Membership dues P 300,000
Unrestricted Support- Contributions 2,500,000
Unrestricted Revenues- Investment Income 48,000
Temporarily restricted gain on sale of investments 4,500 20
Expenses-Fund raising 350,000
Expenses-Research 1,600,000
Expenses- Management and General 150,000
Temporarily Restricted Support-Contribution 300,000
Temporarily Restricted Revenues-Investment Income 25,000
Permanently Restricted Support-Contributions 30,000
Unrestricted Net Assets, January 1,2012 250,000
Temporarily Restricted Net Assets, January 1, 2020 3,000,000
Permanently Restricted Net Assets, January 1, 2020 50,000
The unrestricted support from contributions was received in cash during the year. The expenses
included P 650,000 payable from donor temporarily restricted resources.
Required: Prepare ABC’s statement of activities for the year ended December 31,2020.
Module 5
COOPERATIVES
Overview
This module introduces us to the definition, concepts, and kinds of cooperative

operation in the Philippines.
Module Objectives
After thorough discussion of the topics, the learner will be able to:
 Define and cite the characteristics of a cooperative
 Understand and Compare government agencies, not-for-profit organizations, and
cooperatives
 Identify the basic laws applicable to cooperatives
21  Apply the concepts in accounting for cooperatives.
 Prepare simple financial statements of cooperative
Organization and Registration of Cooperatives

 The primary objective of every cooperative is to help improve the quality of life of its
members.
 A cooperative duly registered shall have limited liability.
 A cooperative shall exist for a period not exceeding fifty (50) years from the date of
registration unless sooner dissolve or unless said period is extended.
 All cooperatives applying for registration shall file with the Authority the Articles of
Cooperation which shall be signed by each of the organizers.
 The articles of cooperation may also contain any other provisions not inconsistent with
any related laws.
 Four copies of each Articles of cooperation,bylaws and the general statement shall be
submittes to the Authority.
 Each cooperative to be registered under RA 9520 shall adopt bylaws not inconsistent
with the provisions of this Code. The bylaws shall be filed at the same time with the
Articles of Cooperation
 Under Art. 10 of R.A 9520 Organizing a Primary Cooperative, Fifteen or more natural
persons who are Filipino citizens, of legal age having a common bond of interest and
are actually residing or working in the intended area of operation,may organize a
primary cooperative under this Code: Provided, that a prospective member of a primary
cooperative must have completed a Pre-Membership Education Seminar (PMES)
 Any newly organized primary cooperative may be registered as multi-purpose

cooperative only after compliance with the minimum requirements for multipurpose
cooperative to be set by the Authority. A single-purpose cooperative may transform into
a mutipurpose or may create subsidiaries only after at least two (2) years of operations.
 Under Article 16 of R.A 9520, a cooperative formed and organized under this code
acquires juridical personality from the date the Authority issues a certificate of
registration under its official seal. All applications for registration shall be finally
disposed of by the Authority within. period of sixty (60) days from the filing thereof,
otherwise the application is deemed approved, unless the cause of delay is attributable
to the applicant: Provided, that in a case of a denial of application for registration, an
appeal shall lie with the Office of the President within ninety (90) days from receipt of
such notice of denial.
 Under Article 17 of RA 9520, Certificate of Registration, A certificate of registration
issued by the Authority under its official seal shall be conclusive evidence that the
cooperative therein mentioned duly registered unless it is proved that the registration
thereof has been cancelled.
Administration
 The General Assembly shall be composed of such members who are entitled to vote
under the articles of cooperation and bylaws of the cooperatives.
 The General Assembly shall be the highest policy-making body of the cooperative and
shall exercise such powers as are stated in RA 9520, in the Articles of cooperation and
bylaws of the cooperatives.
 A regular meeting shall be held anually by the general assembly on a date fixed in the
bylaws, or if not ao fixed, on any dated within ninety (90) days after the clo
 se of each fiscal year. 22
 Whenever necessary, a special meeting of the general assembly may be called at any
time by a majority vote of the board of directors or as provided in the bylaws.
 A quorum shall consists at least 25% of all the members entitled to vote.
 Each member of a primary cooperative shall have only one (1) vote. In the case of
members of secondary or tertiary cooperatives, they shall have one basic vote and as
many incentive votes as provided for in the bylaws but not exceed 5 votes.
 Unless otherwise provided in the bylaws, the direction and management of the affairs of
the cooperative shall be vested in a board of directors which shall be composed of not
less than 5 nor more than 15 members elected by the general assembly for a term of
two years and shall hold office until their succesors are duly elected,or until duly
removed for caused.
 The board of directors shall be responsible for the strategic planning, direction-setting
and policy-formulation activities of the cooperatives.
Responsibilities, Rights and Privileges of Cooperatives

Capital, Property of Funds
 ART. 71. Capital. - The capitalization of cooperatives and the accounting procedures
shall be governed by the provisions of this Code and the regulations which shall be
issued.
 ART. 72. Capital Sources.- Cooperatives registered under this Code may derive their
capital from any or all of the following sources: "(1) Member’s share capital; "(2) Loans
and barrowings including deposits; "(3) Revolving capital which consists of the deferred
payment of patronage refunds, or interest on share capital; and "(4) Subsidies,
donations, legacies, grants, aids and such other assistance from any local or foreign
institution whether public or private: Provided, That capital coming from such subsides,
donations, legacies, grants, aids and other assistance shall not be divided into
individual share capital holdings at any time but shall instead form part of the donated
capital or fund of the cooperative. "Upon dissolution, such donated capital shall be
subject to escheat.
 ART. 73. Limitation on Share Capital Holdings.- No member of primary cooperative
other than cooperative itself shall own or hold more than ten per centum (10%) of the
share capital of the cooperative. "Where a member of cooperative dies, his heir shall be
entitled to the shares of the decedent: Provided, That the total share holding of the heir
does not exceed ten per centum (10%) of the share capital of the cooperative;
Provided, further, That the heir qualify and is admitted as members of the cooperative:
Provided finally , That where the heir fails to qualify as a member or where his total
share holding exceeds ten per centum (10%) of the share capital , the share or shares
excess will revert to the cooperative upon payment to the heir of the value of such
shares.
 "ART. 74. Assignment of Share Capital Contribution or Interest.- Subject to the
provisions of this Code, no member shall transfer his shares or interest in the
cooperative or any part thereof unless. "(1) He has held such share capital contribution
or interest for not less than one (1) year. "(2) The assignment is made to the
cooperative or to a member of the cooperative or to a person who falls within the field of
the membership of the cooperative; and "(3) The board of directors has approved such
assignment.
 "ART.78. Investment of Capital. - A cooperative may invest its capital in any of the
following: "(a) In shares or debentures or securities of any other cooperative; "(b) In any
reputable bank in the locality, or any cooperative; "(c) In securities issued or guaranteed
23 by the Government; "(d) In real state primarily for the use of the cooperative or its
members; or "(e) In any other manner authorized in the bylaws.
 "ART. 79. Revolving Capital. – The general assembly of any cooperative may authorize
the board of directors to raise a revolving capital to strengthen its capital structure by
deferring the payment of patronage refunds and interest on share capital or by the
authorized deduction of a percentage from the proceeds of products sold or services
rendered, or per unit of product or services handled. The board of directors shall issue
revolving capital certificates with serial number, name, amount, and rate of interest to
be paid
 "ART. 51. Address. – Every cooperative shall have an official postal address to which
all notices and communications shall be sent. Such address and every change thereof
shall be registered with the Authority.
 "ART. 52. Books to be Kept Open. –
(1) Every cooperative shall have the following documents ready and accessible to its
members and representatives of the Authority for inspection during reasonable office
hours at its official address: "(a) A copy of this Code and all other laws pertaining to
cooperatives; "(b) A copy of the regulations of the Authority; "(c) A copy of the articles of
cooperation and bylaws of the cooperative; "(d) A register of members; "(e) The books
of the minutes of the meetings of the general assembly, board of directors and
committee; "(f) Share books, where applicable; "(g) Financial statement; and "(h) Such
other documents as may be prescribed by laws or the bylaws.
(2) The accountant or the bookkeeper of the cooperative shall be responsible for the
maintenance of the cooperative in accordance with generally accepted accounting
practices. He shall also be responsible for the production of the same at the time of
audit or inspection. "The audit committee shall be responsible for the continuous and
periodic review of the books and records of account to ensure that these are in
accordance with generally accepted accounting practices. He shall also be responsible

for the production of the same at the time of audit or inspection. "(3) Each cooperative
shall maintain records of accounts such that the true and correct condition and the
results of the operation of the cooperative may be ascertained therefrom at any time.
The financial statements, audited according to generally accepted auditing standards,
principles and practices, shall be published annually and shall be kept posted in a
conspicuous place in the principal office of the cooperative.
"(4) Subject to the pertinent provisions of the National Internal Revenue Code and other
laws, a cooperative may dispose by way of burning or other method of complete
destruction any document, record or book pertaining to its financial and nonfinancial
operations which are already more than five (5) years old except those relating to
transactions which are the subject of civil, criminal and administrative proceedings. An
inventory of the audited documents, records and books to be disposed of shall be
drawn up and certified to by the board secretary and the chairman of the audit
committee and presented to the board of directors which may thereupon approve the
disposition of said records.
Audit, Inquiry and Members’ Right to Examine
 Cooperatives under this Code shall be subject to an annual audit by an auditor who
satisfies all the following qualifications:
(1) He is independent of the cooperative being audited and of any subsidiary of the
cooperative; and
(2) He is a member of any recognized professional accounting or cooperative
auditors’ association with similar qualifications
 The auditor shall submit to the audit committee a report of the audit which shall contain 24
a statement of the assets and liabilities of the cooperative, including earnings and
expenses, amount of net surplus as well as losses and bad debts, if any.
 The audit committee shall forthwith furnish the board of directors a copy of the audit
report. Thereafter, the board of directors shall present the complete audit report to the
general assembly in its next meeting.
 A member shall have the right to examine the records required to be kept by the
cooperative under Article 51 of this Code during reasonable hours on business days
and he may demand, in writing, for a copy of excerpts from said records without charge
except the cost of reproduction.
 Any officer of the cooperative who shall refuse to allow any member of the cooperative
to examine and copy excerpts from its records shall be liable to such member for
damages and shall be guilty of an offense which shall be punishable under Article 106
of this Code: Provided, That if such refusal is pursuant to a resolution or order of the
board of directors, the liability under this article shall be imposed upon the directors who
voted for such refusal: Provided, further, That it shall be a defense of any action under
this article that the member demanding to examine and copy excerpts from the
cooperative records has improperly used any information secured through any prior
examination of the records of such cooperative or was not acting in good faith or for a
legitimate purpose in making his demand.
 Every cooperative shall, at its principal office, keep and carefully preserve the records
required by this Code to be prepared and maintained. It shall take all necessary
precaution to prevent its loss, destruction or falsification.
Allocation and Distribution of Funds

 Notwithstanding the provisions of existing laws, the net surplus of cooperatives shall be
determined in accordance with its bylaws. Every cooperative shall determine its net
surplus at the close of every fiscal year and at such other times as may be prescribed
by the bylaws.
 Any provision of law to the contrary notwithstanding, the net surplus shall not be
construed as profit but as an excess of payments made by the members for the loans
borrowed, or the goods and services availed by them from the cooperative or the
difference of the rightful amount due to the members for their products sold or services
rendered to the cooperative including other inflows of assets resulting from its other
operating activities and which shall be deemed to have been returned to them if the
same is distributed as prescribed herein.
 Order of Distribution
1. An amount for the reserve fund which shall be at least ten per centum (10%) of
net surplus: Provided, That, in the first five (5) years of operation after
registration, this amount shall not be less than fifty per centum (50%) of the net
surplus:
a. The reserve fund shall be used for the stability of the cooperative
and to meet net losses in its operations. The general assembly may
decrease the amount allocated to the reserve fund when the
reserve fund already exceeds the share capital. Any sum recovered on
items previously charged to the reserve fund shall be credited to such
fund.
b. The reserve fund shall not be utilized for investment, other than those
allowed in this Code. Such sum of the reserve fund in excess of the
share capital may be used at anytime for any project that would expand
25 the operations of the cooperative upon the resolution of the general
assembly.
c. Upon the dissolution of the cooperative, the reserve fund shall not be
distributed among the members. The general assembly may resolves:
(i) To establish a usufructuary trust fund for the benefit of anyfederation
or union to which the cooperative is affiliated; and
(ii) To donate, contribute, or otherwise dispose of the amount for the
benefit of the community where the cooperative operates. If the
members cannot decide upon the disposal of the reserve fund, the
same shall go to the federation or union to which the cooperative is
affiliated.
2. An amount for the education and training fund, shall not be more than ten per
centum (10%) of the net surplus. The bylaws may provide that certain fees or a
portion thereof be credited to such fund. The fund shall provide for the training,
development and similar other cooperative activities geared towards the growth
of the cooperative movement:
a. Half of the amounts transferred to the education and training fund
annually under this subsection shall be spent by the cooperative
for education and training purposes; while the other half may be
remitted to a union or federation chosen by the cooperative or of
which it is a member. The said union or federation shall submit to the
Authority and to its contributing cooperatives the following
schedules:
i. (List of cooperatives which have remitted their respective
Cooperative Education and Training Funds (CETF);
ii. Business consultancy assistance to include the nature and

cost; and
iii. Other training activities undertaken specifying therein the
nature, participants and cost of each activity.
b. Upon the dissolution of the cooperative, the unexpended balance of the
education and training fund appertaining to the cooperative shall be
credited to the cooperative education and training fund of the chosen
union or federation.
3. An amount for the community development fund, which shall not be less than
three per centum (3%) of the net surplus. The community development fund
shall be used for projects or activities that will benefit the community where the
cooperative operates.
4. An optional fund, a land and building, and any other necessary fund the total of
which shall not exceed seven per centum (7%).
5. The remaining net surplus shall be made available to the members in the form
of interest on share capital not to exceed the normal rate of return our
investments and patronage refunds: Provided, That any amount remaining after
the allowable interest and the patronage refund have been deducted shall be
credited to the reserve fund.
Types and Categories of Cooperatives

 Credit Cooperative is one that promotes and undertakes savings and lending services
among its members. It generates a common pool of funds in order to provide financial
assistance to its members for productive and provident purposes;
 Consumers Cooperative is one of the primary purpose of which is to procure and
distribute commodities to members and non-members; 26
 Producers Cooperative is one that undertakes joint production whether agricultural or
industrial. It is formed and operated by its members to undertake the production and
processing of raw materials or goods produced by its members into finished or
processed products for sale by the cooperative to its members and non-members. Any
end product or its derivative arising from the raw materials produced by its members,
sold in the name and for the account of the cooperative, shall be deemed a product of
the cooperative and its members;
 Marketing Cooperative is one which engages in the supply of production inputs to
members and markets their products;
 Service Cooperative is one which engages in medical and dental care, hospitalization,
transportation, insurance, housing, labor, electric light and power, communication,
professional and other services;
 Multipurpose Cooperative is one which combines two (2) or more of the business
activities of these different types of cooperatives;
 Cooperative Bank is one organized for the primary purpose of providing a wide range
of financial services to cooperatives and their members;
 Dairy Cooperative is one whose members are engaged in the production of fresh milk
which may be processed and/or marketed as dairy products;
 Financial Service Cooperative is one organized for the primary purpose of engaging
in savings and credit services and other financial services;
 Fishermen Cooperative is one organized by marginalized fishermen in localities
whose products are marketed either as fresh or processed products;
Health Services Cooperative is one organized for the primary purpose of providing
medical, dental and other health services;
 Housing Cooperative is one organized to assist or provide access to housing for the
benefit of its regular members who actively participate in the savings program for
housing. It is co-owned and controlled by its members;
 Insurance Cooperative is one engaged in the business of insuring life and poverty of
cooperatives and their members;
 Transport Cooperative is one which includes land and sea transportation, limited to
small vessels, as defined or classified under the Philippine maritime laws, organized
under the provisions of this Code;
 Water Service Cooperative is one organized to own, operate and manage waters
systems for the provision and distribution of potable water for its members and their
households;
 Workers Cooperative is one organized by workers, including the self-employed, who
are at same time the members and owners of the enterprise. Its principal purpose is to
provide employment and business opportunities to its members and manage it in
accordance with cooperative principles; and
 Advocacy Cooperative is a primary cooperative which promotes and advocates
cooperativism among its members and the public through socially-oriented projects,
education and training, research and communication, and other similar activities to
reach out to its intended beneficiaries;
 Electric Cooperative is one organized for the primary purposed of undertaking power
generations, utilizing renewable energy sources, including hybrid systems, acquisition
and operation of subtransmission or distribution to its household members;
Merger and Consolidation of Cooperatives
27 Dissolution of Cooperatives
 Voluntary dissolution where no creditors are affected - The dissolution may be
affected by the majority vote of the board of directors, and by a resolution duly adopted
by the affirmative vote of at least ¾ of all the members with voting rights.
 Voluntary dissolution where creditors are affected. - The petition for the dissolution
shall be filed with authority.
 Involuntary Dissolution - The cooperative may be dissolved by order of competent
court after due hearing on the grounds of:
o Violation of any law, regulation or provision of its bylaws; or
o Insolvency
 Dissolution by order of the authority - The authority may suspend or revoke, after
due notice and hearing the certificate of registration of a cooperative on any of the
following grounds:
o Having obtained its registration by fraud.
o Existing for an illegal purpose.
o Willful violation despite notice by authority of the provisions of this code or its
bylaws
o Willful failure to operate on a cooperative basis; and
o Failure to meet the required minimum number of members in the cooperative.
 Dissolution by failure to organize and operate
Accounting Policies for Cooperatives

 The legal basis for this Rule is based on Article 71, as follows:
o Capital – The capitalization of cooperatives and the accounting procedures shall

be governed by the provisions of this Code, and the regulations which shall be
issued.
 Capital Sources:
o Members’ Share Capital
o Loans and Borrowings including deposits
o Revolving Capital
o Subsidies, donations, legacies, grants, aids and such other assistance form any
local or foreign institutions.
 Financial Statement Presentation
o Fair presentation
o Complete set of financial statements
o Going Concern
o Accrual
o Comparative
o Consistency
28
 Financial Statements:
29
30
Readings
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ACCOUNTING FOR GOVERNMENT AND NOT-FOR-PROFIT ORGANIZATIONS

ACCOUNTING FOR GOVERNMENT AND

In the Philippines, not-for-profit organizations (NPOs) are typically organized as "non-stock

The World Bank also describes non-government organizations (NGOs) as:

• Voluntary - membership or participation in them is not legally required or otherwise

In many countries, accounting pronouncements cater to the needs of commercial

Unlike in the business community where an exchange transaction occurs, in nonprofit

NPO Governance and Accountability

Unlike in the business community where an exchange transaction occurs, in nonprofit

NON PROFIT ORGANIZATION FOR PROFIT CORPORATIONS

Statement of Financial Position

The net assets section of a nonprofit's statement of financial position requires at a minimum

1. Net assets without donor restrictions

2. Net assets with donor restriction

Components of Statement of Activities:

Reported Expenses and Losses

Expenses are reported according to

 Management and general

 statement of financial position accounts

The Statement of Functional Expenses

The Statement of Cash Flows

The statement of cash flows consists of three sections:

1. net cash from operating activities

The Notes to the Financial Statements

Qualitative Characteristics of Financial Statements

1. Materiality. Information is material if its omission or misstatement could influence the

2. Timeliness. Accounting information must be available on time when needed if it is to

1. Faithful Representation. To be reliable, information must represent faithfully the

5. Completeness. Information must be complete within the bounds of materiality.

Balance between Qualitative Characteristics

Accounting procedures peculiar to specific types of NPOs

1. Health Care Organizations

Health Care Organizations

1. Components of a complete set of financial statements

Financial statements of a health care organizations

a. Statement of financial position

Revenues in the statement of operations are classifies into the following:

Presentation of contributions in the statement of operations

Disclosure of performance indicator

Private, non-profit, Colleges, and Universities

a. Scholarships and fellowships granted freely are treated as direct reduction of

Voluntary Health and Welfare Organizations

Other non-profit organizations

January 31, Cash – general 100,000

Transaction 3. On February 2, a P400 check is written to the utility as a one-time security

February 2 Security Deposit 400

Cash and Cash 15,600.0

Security Deposits 1,400.00 Net Assets

With Donors Restrictions 8,000.00

17,000.0 Total Liabilities and Net 17,000.0

Without Donors With Donors Total

Revenue: P 10,000.00 8,000.00 18,000.00

Change in Net Assets - 1,350.00 8,000.00 16,650.00

Net Asset -ending 8,650.00 8,000.00 16,650.00

Cash and Cash

Security Deposits 1,400.00 Net Assets

- Without Donors 15,350.0

Without Donors With Donors Total

1. Explain the applicability of the PFRSs to NPOs.