Question

Imagine that you work in the accounting department of a university and your boss has asked you to explain components of revenue, expenses, and changes in net asset that are reported on the university’s statement of revenues.

Respond to the following in a minimum of 175 words:

Discuss at least two unique situations or transactions that you may encounter. Describe any circumstances the entity may engage in activities that result in Unrelated Business Income Tax (UBIT).

Answer 1

The University has the sources of revenue as Government grants and recognized on receipt basis however the expenditure required for capital asset same is capitalized. Any grant received in the form of non monetary is recorded at Nominal Value.( as option is provided by the standard) . However Invested Various funds which earned interest over a period.

Expenses are Staff Payments, Establishment expenses , Maintenance of Building Machines and equipment expenses for Labs , Transportation and Other various expenses related to amenities to be provided to residential students.

Net Assets compromised of difference of Total Assets and total Liabilities, in which Total Assets composed of Deposit, Fixed Asset, Investment whereas Liabilities side compromised of Capital Corpus, Current Liabilities and provision.

Receipt of Grant and Investment in Various funds as directed by the government. Finance Cost incurred against various loan and Liabilities, Salaries, Project Funding . These are the transaction encountered for managing the accounting of University

Unrelated Business Income Tax are those source of income which are not generated form principle purpose of University, they are Renting Income from let out of Auditorium, Electricity Charges Recovered, Hostel Charges etc.