Accounting and Reporting for Not-for-Profit Organizations

Case Study Solutions

Case study 1

Required question suggested solutions

Jane:	A lot of accounting for not-for-profit (NFP) entities is more like business accounting than you might think. For instance, the annual reports must include three statements: A statement of financial position, a statement of activities (which, in many ways, corresponds to the for-profit income statement), and a statement of cash flows. Similar to for-profit financial statements, the financial statement of an NFP entity focuses on the organization as a whole.
One of the unique features of NFP entities is contributions. Contributions may take the form of outright gifts of cash or other assets donated to the entity, or pledges of support to be provided to the entity in the future. Contributions may be restricted regarding the use (determined and imposed by the donor). It is vital for NFP organizations to be able to track the various types of contributions it receives, such as contributions with and without donor restrictions.
NFPs also often receive valuable contributed services. There are specific rules about the accounting for these services—measuring their value, describing the services, and including their value in the body of the financial statements.
NFP entities do not have owners in the typical sense or stockholders’ equity. Owners of a business entity are rewarded monetarily for their ownership interests. NFP entities are generally prohibited from making distributions to those individuals ...