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    Activity Module 4 Part 1 Solis

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    This document discusses accounting for non-profit organizations (NPOs). It explains that while PFRS are intended for profit-oriented entities, they can also apply to NPOs with some modifications. It describes accounting for the assets, liabilities, equity, revenues and expenses of NPOs. The four main financial statements for NPOs are identified as the balance sheet, income statement, statement of cash flows, and statement of functional expenses. The document concludes by stating that while general accounting principles apply to all NPOs, some types like health care organizations, colleges/universities, voluntary organizations, and others may have unique accounting procedures.

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    Activity Module 4 Part 1 Solis

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    CPAREVIEW
    117 views2 pages
    This document discusses accounting for non-profit organizations (NPOs). It explains that while PFRS are intended for profit-oriented entities, they can also apply to NPOs with some modifications. It describes accounting for the assets, liabilities, equity, revenues and expenses of NPOs. The four main financial statements for NPOs are identified as the balance sheet, income statement, statement of cash flows, and statement of functional expenses. The document concludes by stating that while general accounting principles apply to all NPOs, some types like health care organizations, colleges/universities, voluntary organizations, and others may have unique accounting procedures.

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    This document discusses accounting for non-profit organizations (NPOs). It explains that while PFRS are intended for profit-oriented entities, they can also apply to NPOs with some modifications. It describes accounting for the assets, liabilities, equity, revenues and expenses of NPOs. The four main financial statements for NPOs are identified as the balance sheet, income statement, statement of cash flows, and statement of functional expenses. The document concludes by stating that while general accounting principles apply to all NPOs, some types like health care organizations, colleges/universities, voluntary organizations, and others may have unique accounting procedures.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    117 views2 pages

    Activity Module 4 Part 1 Solis

    Uploaded by

    CPAREVIEW
    This document discusses accounting for non-profit organizations (NPOs). It explains that while PFRS are intended for profit-oriented entities, they can also apply to NPOs with some modifications. It describes accounting for the assets, liabilities, equity, revenues and expenses of NPOs. The four main financial statements for NPOs are identified as the balance sheet, income statement, statement of cash flows, and statement of functional expenses. The document concludes by stating that while general accounting principles apply to all NPOs, some types like health care organizations, colleges/universities, voluntary organizations, and others may have unique accounting procedures.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
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    of 2

    Solis, John Raezie S.

    BSA 3-2
    Accounting for Government and Non-Profit Org.

    1. Explain the applicability of PFRS to NPOs


    The PFRSs are intended to apply to the general-purpose financial statements and other financial
    reporting of profit-oriented entities. Although the IFSs/PFRSs are designed to apply to business
    entities, they can also be applied to non-profit organizations. In practice, the accounting for NPOs
    is essentially similar to the accounting for businesses. The notable differences are the
    terminologies used in the financial statements, which are modified to suit the NO's purpose, and
    the presentation and disclosure of equity. Non-profit organization (NPO) - is one that carries out
    some socially desirable needs of the community or its members and whose activities are not
    directed towards making profit. Surplus revenues of NPOs do not inure to the benefit of a
    particular individual or group of individuals but rather retained in furtherance of the organization's
    mission. Accordingly, none of the surplus revenues are distributed as dividends.

    2. Account for the assets, liabilities, equity, revenues and expenses of NPOs
    Identify and account for the NPOs' assets, liabilities, equity, revenues, and costs. The initial
    measurement is at cost, unless the PFRS specifically calls for measurement at fair value or
    another value. An asset (or liability) is recognized when it no longer facilitates (or demands) the
    inflow (or outflow) of resources bearing economic advantages.Non-profit organizations use their
    surplus funds to further their missions rather than giving it to a particular individual or group of
    individuals.

    3. Enumerate and describe the financial statements of NPOs


    Nonprofits use four main financial reporting statements: balance sheet, income statement,
    statement of cash flows and statement of functional expenses. Three of these are similar to
    common for-profit company statements, with the functional expenses statement being unique.
    Balance Sheet, The nonprofit balance sheet is also commonly referred to as a statement of
    financial position or statement of financial condition. The balance sheet is based on the
    accounting formula, assets equals liabilities plus net assets. This is a mirror of the for -profit
    balance sheet other than for-profits have owners' equity instead of net assets. The balance
    sheet offers the best overall perspective on the nonprofit's stability. In particular, leaders want
    to know if it is overwhelmed by liabilities. Income Statement, Often referred to as a statement
    of activity since income statement is more associated with for-profit companies and earnings,
    the nonprofit income statement follows the formula, revenues minus expenses equals change
    in net assets. Revenues less expenses is the general equations for earnings in for-profits. For
    a nonprofit, it shows the changes in funds coming into the organization versus costs in operating
    it. Nonprofits need positive changes in net assets to maintain stability in managing programs.
    As suggests, the income statement for profit and non-profit organizations may look similar, but
    it reflects two different motivations. Statement of Functional Expenses, The statement of
    functional expenses is only used by nonprofit organizations based on the importance of
    monitoring expenditures. Nonprofits do not use the statement of owners' equity common to for-
    profits. In general, this statement breaks down organizational expenses into common
    categories, such as programs, management expenses, direct mail campaigns and the salaries
    of fundraising staff. This helps the company track how it spends its money, reports. The
    statement also shows the breakdown of expenses between program services and support
    services. One of the reasons nonprofits track expenses is to report on the percentage of its
    funds that go toward programs compared to funds spent on administration costs, such as
    employee salaries.Nonprofit Financials Statement of Cash Flows, The statement of cash
    flows is similar to the one used by for-profits. It has similar category breakdowns of operating,
    investing and financing activities to show where cash is coming from and how it is going out.
    Nonprofits want to track changes in cash flow to see whether it has an adequate supply of
    incoming cash to cover program and support needs.

    4. State the 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

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