Streetsmart Financial Basics for Nonprofit Managers

Chapter 3Accounting as a Second Language: A Nine-Point Program

Accounting was probably the furthest thing from your mind while you taught your students, managed works of art, or advocated changes in public policy. But now that you have some management responsibilities, it suddenly looks like a good thing to learn. Problem is, you don't want to become a Certified Public Accountant just to be able to find your way around a financial management system. If so, then this chapter is for you.

Welcome to a special mini-course in accounting as a second language. Not a comprehensive treatment of the subject by any means, it aims to give you a rudimentary grasp of some key concepts that will get you out of financial management trouble—or help you avoid it in the first place. Taken together, these nine concepts will span most of the conceptual ground that ordinary accounting covers. Most important, they'll give you a decent grounding in accountingspeak.

The Entity Principle

Begin with the non-startling revelation that accounting books and records are kept for entities. This simple idea may not seem like much of a revelation, but think about it for a moment. Entities are legal vehicles, such as corporations and partnerships, established to carry out specific business purposes. The difference between entities and individuals is deceptively simple. Entities involve many people with different levels of accountability to each other, while individuals are accountable to no one but themselves. ...