List the 2 types of Not-for-Profit Entities and give an example of each. Which t
ID: 2582792 • Letter: L
Question
List the 2 types of Not-for-Profit Entities and give an example of each.
Which type is the focus of the CPA Exam?
Who prescribes the accounting rules for Nongovernmental Not-for-Profits and VHWOs?
Which basis of accounting is used by nongovernmental not-for-profits and VHWOs?
Is Fund Accounting used by nongovernmental not-for-profits and VWHOs? If so, when is it appropriate to report on a fund basis?
What three categories of net assets are reported by nongovernmental not-for-profits and VHWOs?
Which user group imposes restrictions on resources?
GASB 35 applies to which nonprofits? List one of its requirements.
Nongovernmental Not-for-Profits and VHWOs report Expenses by function. List the two Functions presented.
Why is the aforementioned Expense classification required?
Explanation / Answer
List the 2 types of Not-for-Profit Entities and give an example of each
ANSWER 1 : Not-for-Profit Organizations
Perhaps you have donated time or money to the American Red Cross or your church. These organizations are considered not-for-profit organizations. This isn't to say, however, that the ARC or your church cannot make a profit. Not-for-profit organizations can earn profits - just not for their owners. What is meant by this is that any profits earned must be used for the organization's objectives.
Not-for-profit organizations can still hire and pay staff as do for-profit organizations. Mainly, however, not-for-profits utilize volunteers to control costs. Not-for-profits don't have owners as for-profits typically do; rather, they're owned by themselves. Like for-profit organizations, not-for-profits typically have a board of directors.
Another difference is that not-for-profit organizations typically apply for tax-exempt status. This status grants the organization exemption from most forms of taxation (a main type of taxation typically avoided by tax-exempt organizations is sales tax). Not-for-profit status also enables these organizations to obtain funding, such as grants.
Organization Types
There are a lot of not-for-profits. A few of the more prominent not-for-profits include:
Do you bank with a federal credit union? It is most likely a 501(c)(1) organization. If you want to surprise the teller, ask the next time you go in!
What about some of the names you've seen on the TV and the Internet? St. Jude Children's Research Hospital (more commonly known as St. Jude's) is a well-known 501(c)(3). The American Red Cross, the Salvation Army, and Goodwill are also well-known 501(c)(3)s. Your local community association, provided its purpose is to promote social welfare and the common good, is most likely organized as a 501(c)(4). Your local chamber of commerce is most likely a 501(c)(6). Also, keep in mind that doing business with not-for-profit organizations can help further their purposes.
Who prescribes the accounting rules for nongovernmental not-for-profits and VHWOs ?
ANSWER: Jurisdiction over Not-for-Profit Organizations
A. FASB -- Regulates the accounting and reporting practices for all "private" not-for-profit-organizations; GASB governs governmentally affiliated organizations.
B. "Private" NFPs -- Most not-for-profit organizations fall under this category; FAS 116 prescribes the rules for recognition of contributions and FAS 117 prescribes the external reporting requirements for all private NFP organizations;
Which basis of accounting is used by nongovernmental not-for-profits and VHWOs ?
Basis of accounting is on ACCRUAL BASIS. This includes calculation and recording of depreciation expense.
Is Fund Accounting used by nongovernmental not-for-profits and VWHOs? If so, when is it appropriate to report on a fund basis?
ANSWER: Fund accounting is generally not required however many not-for-profit organizations continue to use fund accounting for internal accounting.
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