What are GAAP requirements for preparing financial statements? Use the following

Question

What are GAAP requirements for preparing financial statements?

Use the following adjusted trial balance for Decatur Health Clinic to Create a statement of financial position, statement of functional expenses, statement of activities, and statement of cash flows

. Prepare all financial statements as of June 30, 20X7 including the following transactions.

There were five functional expense categories, which salaries and fringe benefits totaling $288,410 were allocated to with the following percentages: counseling services, 30%; professional training, 25%; community service, 15%; management and general, 20%; and fund-raising, 10%.

Occupancy and utility, supplies, printing and publishing, and telephone and postage expense were allocated to the programs using the same allocation procedures.

The five expense categories received equal amounts of depreciation expense. Decatur Health Clinic had $162,150 of cash on hand at the beginning of the year and received cash from contributors of $305,200, which was unrestricted. $38,100 was restricted for the purchase of a machine for the clinic.

Income earned and received on long- term investments was $9,200.

The purchase of the machine for the clinic was $22,000 and $82,500 for operating expenses.

Net pledges receivable increased $6,000, inventory decreased $1,000, accounts payable decreased $102,500, and there were no salaries payable at the beginning of the year.

Decatur Health Clinic Adjusted Trial Balance As of June 30, 20X7 Debits Credits Cash 150,500 Pledges Receivable-Unrestricted 36,000 Estimated Uncollectible Pledges 2,300 Inventory 2,800 Investment 178,000 Furniture and Equipment 210,000 Accumulated Depreciation-Furniture and Equipment 125,000 Accounts payable 20,520 Unrestricted Net Assets 206,500 Temporarily Restricted Net Assets 61,300 Permanently Restricted Net Assets 140,000 Contributions-Unrestricted 348,820 Contributions-Temporarily Restricted 38,100 Investment Income-Unrestricted 9,200 Net Assets Released from Restrictions- Temporarily Restricted 22,000 Net Assets released from Restrictions- Unrestricted 22,000 Salaries and Fringe Benefit Expense 288,410 Occupancy and Utility Expense 38,400 Supplies Expense 6,940 Printing and Publishing Expenses 4,190 Telephone and Postage Expense 3,500 Unrealized Gain or Investments 2,000 Depreciation Expense 35,000 Totals 975,740 975,740

Explanation / Answer

Generally accepted accounting principles are a set of 10 accounting standards and guidelines created and maintained by the U.S. Financial Accounting Standards Board. Since the FASB established GAAP guidelines in 1973, the U.S. Securities and Exchange Commission and the American Institute of Certified Public Accountants have adopted GAAP as official standards of financial accounting. Both require all public and some privately held businesses, as well as external auditors, to adhere to GAAP standards in all aspects of financial reporting and auditing. The overall objective is to create consistency in financial reporting and financial statements and ensure financial statements contain reliable, concise, and understandable information.

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