About Me
CPA
1 Regulation (REG)
1.1 Ethics, Professional Responsibilities, and Federal Tax Procedures
1.1 1 Professional ethics and responsibilities
1.1 2 Federal tax procedures and practices
1.1 3 Circular 230
1.2 Business Law
1.2 1 Legal rights, duties, and liabilities of entities
1.2 2 Contracts and sales
1.2 3 Property and bailments
1.2 4 Agency and employment
1.2 5 Business organizations
1.2 6 Bankruptcy
1.2 7 Secured transactions
1.3 Federal Taxation of Property Transactions
1.3 1 Basis determination and adjustments
1.3 2 Gains and losses from property transactions
1.3 3 Like-kind exchanges
1.3 4 Depreciation, amortization, and depletion
1.3 5 Installment sales
1.3 6 Capital gains and losses
1.3 7 Nontaxable exchanges
1.4 Federal Taxation of Individuals
1.4 1 Gross income inclusions and exclusions
1.4 2 Adjustments to income
1.4 3 Itemized deductions and standard deduction
1.4 4 Personal and dependency exemptions
1.4 5 Tax credits
1.4 6 Taxation of individuals with multiple jobs
1.4 7 Taxation of nonresident aliens
1.4 8 Alternative minimum tax
1.5 Federal Taxation of Entities
1.5 1 Taxation of C corporations
1.5 2 Taxation of S corporations
1.5 3 Taxation of partnerships
1.5 4 Taxation of trusts and estates
1.5 5 Taxation of international transactions
2 Financial Accounting and Reporting (FAR)
2.1 Conceptual Framework, Standard-Setting, and Financial Reporting
2.1 1 Financial reporting framework
2.1 2 Financial statement elements
2.1 3 Financial statement presentation
2.1 4 Accounting standards and standard-setting
2.2 Select Financial Statement Accounts
2.2 1 Revenue recognition
2.2 2 Inventory
2.2 3 Property, plant, and equipment
2.2 4 Intangible assets
2.2 5 Liabilities
2.2 6 Equity
2.2 7 Compensation and benefits
2.3 Specific Transactions, Events, and Disclosures
2.3 1 Leases
2.3 2 Income taxes
2.3 3 Pensions and other post-retirement benefits
2.3 4 Derivatives and hedging
2.3 5 Business combinations and consolidations
2.3 6 Foreign currency transactions and translations
2.3 7 Interim financial reporting
2.4 Governmental Accounting and Not-for-Profit Accounting
2.4 1 Governmental accounting principles
2.4 2 Governmental financial statements
2.4 3 Not-for-profit accounting principles
2.4 4 Not-for-profit financial statements
3 Auditing and Attestation (AUD)
3.1 Engagement Planning and Risk Assessment
3.1 1 Engagement acceptance and continuance
3.1 2 Understanding the entity and its environment
3.1 3 Risk assessment procedures
3.1 4 Internal control
3.2 Performing Audit Procedures and Evaluating Evidence
3.2 1 Audit evidence
3.2 2 Audit procedures
3.2 3 Analytical procedures
3.2 4 Substantive tests of transactions
3.2 5 Tests of details of balances
3.3 Reporting on Financial Statements
3.3 1 Audit report content
3.3 2 Types of audit reports
3.3 3 Other information in documents containing audited financial statements
3.4 Other Attestation and Assurance Engagements
3.4 1 Types of attestation engagements
3.4 2 Standards for attestation engagements
3.4 3 Reporting on attestation engagements
4 Business Environment and Concepts (BEC)
4.1 Corporate Governance
4.1 1 Internal controls and risk assessment
4.1 2 Code of conduct and ethics
4.1 3 Corporate governance frameworks
4.2 Economic Concepts
4.2 1 Microeconomics
4.2 2 Macroeconomics
4.2 3 Financial risk management
4.3 Financial Management
4.3 1 Capital budgeting
4.3 2 Cost measurement and allocation
4.3 3 Working capital management
4.3 4 Financial statement analysis
4.4 Information Technology
4.4 1 IT controls and security
4.4 2 Data analytics
4.4 3 Enterprise resource planning (ERP) systems
4.5 Operations Management
4.5 1 Strategic planning
4.5 2 Project management
4.5 3 Quality management
4.5 4 Supply chain management
2 4 3 Not-for-Profit Accounting Principles Explained

4 3 Not-for-Profit Accounting Principles Explained

Key Concepts

Revenue Recognition

Revenue recognition in not-for-profit (NFP) organizations follows specific guidelines to ensure that revenue is recorded in the period it is earned. This includes contributions, grants, and program service revenue. Revenue is recognized when there is persuasive evidence of an arrangement, the service has been provided, and the amount of the revenue can be reasonably determined.

Example: A nonprofit receives a grant for $50,000 to fund a specific program. The revenue is recognized over the period the program is executed, not when the grant is received.

Expense Classification

Expenses in NFP organizations are classified based on their relationship to program services, management, and fundraising activities. Program expenses are directly related to the organization's mission, while management and general expenses cover administrative functions, and fundraising expenses are related to raising contributions.

Example: A nonprofit organization incurs $100,000 in program expenses for delivering services, $20,000 in management and general expenses, and $10,000 in fundraising expenses.

Net Assets and Fund Accounting

Net assets in NFP organizations are classified into three categories: unrestricted, temporarily restricted, and permanently restricted. Fund accounting is used to manage these assets, ensuring that resources are used according to donor restrictions and organizational policies.

Example: A donor gives $10,000 with the restriction that the funds must be used for a specific program within two years. This amount is recorded as temporarily restricted net assets until the funds are used for the specified purpose.

Statement of Financial Position

The statement of financial position, similar to a balance sheet, presents the assets, liabilities, and net assets of the NFP organization. It provides a snapshot of the organization's financial health at a specific point in time.

Example: An NFP organization reports $500,000 in assets, $100,000 in liabilities, and $400,000 in net assets on its statement of financial position.

Statement of Activities

The statement of activities, akin to an income statement, reports the changes in net assets during a period. It shows the organization's revenue, expenses, and the resulting increase or decrease in net assets.

Example: An NFP organization reports $200,000 in revenue, $150,000 in expenses, and a net increase in unrestricted net assets of $50,000 on its statement of activities.

Examples and Analogies

Consider revenue recognition as "timing the harvest" of funds. Just as a farmer harvests crops when they are ripe, an NFP organization recognizes revenue when it is earned.

Think of expense classification as "sorting mail." Just as mail is sorted into different categories (bills, personal letters, etc.), expenses are sorted into program, management, and fundraising categories.

Net assets and fund accounting are like "saving for a rainy day." Just as one saves money for specific purposes, NFP organizations manage their assets according to restrictions and policies.

The statement of financial position is akin to a "photograph" of the organization's financial status, capturing a moment in time.

The statement of activities is like a "diary entry" that records the day's events, summarizing the changes in the organization's financial position over a period.

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