ACCOUNTS: The Foundation Tools of Financial Recordkeeping

Major Accounting Categories

Liabilities

Items
Accounts Payable

Definitions
The unpaid bills of a not-for-profit organization. These are bills for goods or services that have been received by the organization prior to the end of its fiscal year. IOU's for goods and services received by a not-for-profit organization for which either an invoice has not been received or the entire invoice does not apply to the fiscal yearend reporting. Contributions owed the organization. A pledge that hasn't yet been fulfilled. The "outflows or other using up of assets or incurrence of liabilities (or the combination of both) from delivering or producing goods, rendering services, or carrying out other activities that constitute the entity's ongoing major or central operations."

Liabilities

Accrued Expenses Contributions Receivables Expenses

Assets

Expenses Assets Revenues Assets

Administrative Fees Fees dealing with the administration of the organization including audit fees, banking
fees, legal fees, etc.

Cash Equivalents Interest Income Inventories

Financial Instruments that are readily convertible to cash within three months--Treasury notes, money market funds, commercial paper.

Interest payments received from the bank on the organization's savings accounts, etc. Items that the organization expects to sell. In other words, supplies that are expected to be used by the not-for-profit organization in its operations should not be reported as inventories. Liabilities owed by the non-profit to others. "Debt is known by several different names, usually based on how long the debt has before it becomes due , or matures. Shortterm loan (five years or less) Line of credit (like checking account overdraft privileges) "It is important to note that a liability is not recorded at the time that the not-for profit organization obtains the line of credit, but rather when it draws down on the credit line. Probable future sacrifices of economic benefits arising from present obligations of a particular entity to transfer assets or provide services to other entities in the future as a result of past transactions or events. An pre-agreed amount that the organization can borrow-- like checking account overdraft privileges. "It is important to note that a liability is not recorded at the time that the not-for profit organization obtains the line of credit, but rather when it draws down on the credit line. A type of debt usually associated with the construction of a facility or other major capital improvement. The difference between the assets and liabilities of a non-for-profit organization. Not for profit organizations sometimes have other receivables reported on their statement of financial position representing money owed to them for reasons other than the two main categories previously described. Examples: Amounts owed under grants (for general support); Reimbursements of expenses; Reimbursement of expenses paid on behalf of other not-for-profit organizations. Money other than security deposits or restricted money--Money is the most liquid asset that has no strings attached to it at all. Payment made to the organization by others in exchange for the goods provided by the organization, etc. Payment made to the organization by others in exchange for the services provided by the organization, etc. Payments the organization makes to others related to the space that the organization occupies Payments the organization makes to others related transportation activities such as vehicle purchases, auto insurance, auto maintenance and repairs, etc. Net assets that a donor has instructed the not-for-profit organization to maintain in perpetuity, that is permanently. IE Endowment where only the interest can be used not the principal. Assets that arise because an organization has paid for services that it will receive in the future, with the future being defined as a time past the fiscal year-end. EXAMPLE--Online education software subscriptions bought in May with left over funds that will be used starting the following September. Purchases made by the organization related to program operation including supplies, furniture, textbooks, computers, etc. Rent payment received from others who areetc occupying orgnazation's space, etc. The "inflows or other enhancements of assets of an entity or settlement of its liabilities (or a combination of both) from delivering or producing goods, receiving, services, or other activities that constitute the entity's ongoing major or central operation."

Liabilities

Debt

Liabilities

Liabilities

Line of Credit

Liabilities

Long-term debt Net Assests

Assets

Other Receivables

Assets Revenues Revenues Expenses Expenses Net Assests

Cash Product Revenue Service Revenue Facility Transportation Permanently Restricted Net Assets

Assets

Prepaid Expenses

Expenses Revenues

Program Expenses Rental Income Revenues

Expenses Liabilities

Personnel Expenses Short-term debt Property Plant and Equipment

Salaries and Benefits paid to employees Short-term loan (one year or less) Sometimes referred to as fixed assets, the property, plant (building) and equipment of a not-for-profit organization represents its long-lived assets used in the conduct of the organization's business. These would include land, buildings, equipment, office furnishings, computers, vehicles and other similar assets. Normally there are minimums amounts here. ( Lease-hold improvements, Capitalized leases. P. 18 ) Stocks, bonds, IOU's

Assets

Assets Net Assests

Investments Temporarily Restricted Net Assets Assets

Net assets whose use is limited by either a donor-imposed time restriction or a donorimposed purpose restriction. The probable future economic benefits obtained or controlled by a particular entity as a result of past transactions or events Funds that are owed to the not-for profit organization from individuals or other organizations because of services provided or goods sold to these other entities. The receivable should not be recorded until the organization actually "earns" the revenue. Not all receivables are ultimately collected. Net assets of a not-for-profit organization that are not temporarily restricted or permanently restricted.

Assets

Accounts Receivables Unrestricted Net Assets

Net Assests

Liabilities

Deffered Income

When cash is received by a not-for-profit organization prior to its either having earned the income or the right to keep the income, it records the cash along with a liability-type account called deferred income. (See Page 28. Subscription sales to the Opera before the shows are produced.)