Question

Answer the questions using this table:

ACCOUNTS
Fundraising expenses $40,705
Contributions
Permanent $78,215
Non-restrictive $15,325
Temporarily restricted $179,200
Donations:
Temporarily restricted $7,620
Permanent $2,525
Non-restrictive $5,775
Training and research expenses $14,142
Other income:
Permanent $13,000
Retail sales $125,000
General and administrative expenses $110,748
Program Services $108,575
Subsidies:
Temporarily restricted $26,000
Permanent $277,000
Non-restrictive $16,350

Questions:

1. What are GASBs? How do they differ from FASBs? (4 points)
2. The accounting equation for a for-profit company is: Assets = Liabilities + Capital. What would be the accounting equation for a non-profit company? (3 points)
3. It mentions the main sources of income for government units. (3 points)
4. It mentions the three basic financial statements required for nonprofit organizations and their functions. (2 points for state and function, 6 points)

Answer 1

1. GASBs are Government Accounting Standard Board which is established to set accounting standards for state and local government entities.

FASBs stands for Financial Accounting Standard Board whish is established to set rules for private entities.

Differences :

- Scope of GASB is Government and FASB is public companies

- Underlying principle of GASB is to ensure proper conduct of accounting and reporting activities of government organization and FASB is to ensure proper conduct of accounting and reporting activities of private organization and reliable information to shareholders

- GASB advocates modified accrual accounting while FASB advocates full accrual accounting which measures revenue only when it is measurable

- GASB provides 3 methods for government accounting whereas FASB provides only one method for non profit organization

2. Accounting equation for Non profit organization is Accumulated Funds + Liabilities = Assets

3. Source of Income for Government units are :

- Tax collection

- Income generated from Assets held by Government

- Fees / Fine and Penalties

- Surplus from public sector units

4. Basic Financial Statements for NPO

- Statement of Activities

- Statement of Cash Flows

- Statement of Financial position

Functions :

Statement of Activities

- Statement that qualifies the revenues and expenses

- Revenues and expenses are broken down into Unrestricted, temporary restricted and permanently restricted classification

Statement of Cashflow

- Differentiating cashflows generated from operating, investing and financial activities

- To decide whether it has an adequate supply of incoming cash to cover program and support needs

Statement of Financial position

- Equity section of balance sheet is replaced by net assets

- Net assets are broken down into Unrestricted, temporary restricted and permanently restricted assets