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 4 Not-for-Profit Financial Statements Explained

4 4 Not-for-Profit Financial Statements Explained

Key Concepts

Not-for-Profit Organizations

Not-for-profit organizations (NPOs) are entities that operate for purposes other than generating profit. They are typically focused on serving a public or social benefit, such as education, healthcare, or charitable activities.

Financial Statements for Not-for-Profit Entities

Financial statements for not-for-profit entities are designed to provide information about the organization's financial position, changes in net assets, and cash flows. These statements help stakeholders understand how the organization is managing its resources and fulfilling its mission.

Statement of Financial Position

The Statement of Financial Position, similar to a balance sheet, presents the organization's assets, liabilities, and net assets as of a specific date. It provides a snapshot of the organization's financial health.

Example: A charity has $500,000 in cash, $300,000 in investments, and $200,000 in liabilities. The Statement of Financial Position would show net assets of $600,000 ($500,000 + $300,000 - $200,000).

Statement of Activities

The Statement of Activities reports changes in an organization's net assets over a period. It includes revenues, expenses, gains, and losses, and provides insights into the organization's financial performance.

Example: A university reports $10 million in tuition revenue, $5 million in grants, and $8 million in expenses. The Statement of Activities would show an increase in net assets of $7 million ($10 million + $5 million - $8 million).

Statement of Cash Flows

The Statement of Cash Flows details the organization's cash inflows and outflows during a period. It helps stakeholders understand how the organization is generating and using cash to support its operations.

Example: A hospital receives $2 million in donations, $1 million in government grants, and spends $1.5 million on medical supplies. The Statement of Cash Flows would show net cash inflows of $1.5 million ($2 million + $1 million - $1.5 million).

Net Assets and Fund Accounting

Net assets represent the residual interest in the organization's assets after deducting its liabilities. Not-for-profit entities often use fund accounting to segregate assets, liabilities, revenues, and expenses based on their specific purposes or restrictions.

Example: A museum has a general fund for unrestricted operations, an endowment fund for long-term investments, and a restricted fund for specific projects. Each fund maintains its own set of financial records, and the organization reports the combined results in its financial statements.

Examples and Analogies

Consider a not-for-profit organization as a "community service center" that uses donations and grants to provide essential services. The Statement of Financial Position is like a "health check" that shows the center's financial resources and obligations.

The Statement of Activities is akin to a "performance report" that details how the center is using its resources to achieve its mission. The Statement of Cash Flows is like a "cash management report" that tracks the center's cash inflows and outflows.

Net assets and fund accounting are like "separate bank accounts" for different purposes, ensuring that funds are used according to donors' intentions and organizational goals.

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