Under NFP accounting, what types of donated services would be considered revenue and what would not be recorded?
The big question to ask is “Would the NFP otherwise spent money on service”? The big differentiator is whether the service requires skilled or unskilled labor. Most of the big accounting firms encourage their senior employees to donate their time and services to local NFP’s. This is an example of specialized labor that the NFP…
What is an exchange transaction under NFP accounting?
An exchange transaction is when a NFP exchanges value for donations in return. For example, if a museum donates free tickets in exchange for cash donations, then that is considered an exchange transaction. When not-for-profits recognize revenues in exchange for services provided to the resource’s provider, they will be classified as increases to net assets…
What is the journal entry to record a donation of services for a NFP entity?
When someone donates their services, they are really just donating their time. However, the key thing to note that is that donated services must be for skilled labor and not unskilled labor. For example, a lawyer, accountant, or healthcare professional would donate services in the form of their time to provide advice. The professional would…
What is the journal entry to record a contribution of assets for a not-for-profit entity?
When a donor contributes assets (cash, equipment, car, etc.), the value of the donation is measured at fair-market-value (“FMV”). Donations can either be restricted or unrestricted. As you can see in the example below, medical equipment was donated and the FMV was $25,000. For a donation with no restrictions (i.e. unrestricted), the NFP entity would…
How are contributed assets or contribution of time valued by an NFP?
When a donor contributes assets or services (i.e. time), the NFP entity should record the donation at fair-market-value.
What is included in the statement of financial position for an NFP?
The statement of financial position is essentially the balance sheet for not-for-profit organization. The visual below lists out the three main elements to the statement of financial position:
What is included in the statement of activities?
The statement of activities is issued by a not-for-profit organization and is similar to an income statement (issued by for-profit organizations). Th statement of activities will include the following: 1) Changes in net assets – Similar to net income in the sense that it’s the summation of revenue and expenses. If revenue exceeds expenses, then…
What are the key financial schedules that a not-for-profit (NFP) entity must prepare
The financial statements for not-for-profit organizations are listed separately than what you are accustomed to seeing on the financial reports for for-profit entities. The required external financial statements that non-for-profit organizations will include a statement of financial position, statement of activities, and statement of cash flows:
