5.3 Accounting for Non-Profit Organizations

• What is the primary purpose of non-profit organizations?

  Serve the public benefit
• Non-profit organizations do not have individual ownership
• Non-profit organizations can distribute profits to individuals.

  False
• Match the funding source with its description:

  Donations ↔️ Gifts of money or assets

  Grants ↔️ Funding from organizations

  Membership fees ↔️ Payments for organizational access
• Non-profit organizations are often exempt from income taxes
• What does fund accounting track in non-profit organizations?

  Resources allocated to programs
• Non-profit organizations recognize revenue when grants are received or promised.
• Expenses in non-profit organizations are matched to the programs or activities
• Why are transparency and stewardship crucial in non-profit accounting?

  Maintain trust and accountability
• The Statement of Financial Position for non-profits shows assets, liabilities, and net assets
• The Statement of Activities reports revenues, expenses, and changes in net assets over a period.
• Match the cash flow activity with its description:

  Operating activities ↔️ Daily business transactions

  Investing activities ↔️ Purchase or sale of assets

  Financing activities ↔️ Issuance of debt or equity
• What is the purpose of fund accounting in non-profit organizations?

  Track resources by fund
• Unrestricted funds can be used for any organizational purpose
• Permanently restricted funds have donor-imposed restrictions that never expire.
• What is the purpose of fund accounting in non-profit organizations?

  Maintain transparency
• There are three main types of funds
• Match the fund type with its definition:

  Unrestricted Funds ↔️ Donations usable for any purpose

  Temporarily Restricted Funds ↔️ Funds with expiring donor restrictions

  Permanently Restricted Funds ↔️ Funds with endless donor restrictions
• Fund accounting helps non-profits demonstrate stewardship and maintain donor confidence.
• What does revenue recognition refer to in non-profit organizations?

  Recording revenue when earned
• Donations are recognized as revenue when the pledge is made or cash is received.
• Order the functional expense categories in non-profit organizations:

  1️⃣ Program Services

  2️⃣ Management and General

  3️⃣ Fundraising
• Match the expense category with its example:

  Program Services ↔️ Salaries for program staff

  Management and General ↔️ Office rent, administrative salaries

  Fundraising ↔️ Fundraising event costs
• Management and General expenses include costs for administrative and governance activities.
• Non-profit organizations are entities whose primary purpose is to serve the public benefit
• Non-profit organizations cannot distribute profits to owners or shareholders.
• Match the accounting principle with its non-profit application:

  Fund Accounting ↔️ Tracks resources for specific funds

  Revenue Recognition ↔️ Recognizes grants when promised

  Expense Recognition ↔️ Matches expenses to programs
• What is the purpose of the Statement of Financial Position in non-profit accounting?

  Shows assets, liabilities, net assets
• The Statement of Financial Position includes assets, liabilities, and net assets.
• Order the three types of cash flow activities in the Statement of Cash Flows:

  1️⃣ Operating Activities

  2️⃣ Investing Activities

  3️⃣ Financing Activities
• What are the three key components of financial statements for non-profit organizations?

  Statement of Financial Position, Statement of Activities, Statement of Cash Flows
• The Statement of Financial Position shows an organization's assets, liabilities, and net assets at a specific point in time
• The Statement of Cash Flows tracks cash inflows and outflows from operating, investing, and financing activities.
• What does a $< latex > 10,000$ increase in net assets indicate in the Statement of Activities?


  Revenues exceeded expenses
• Fund Accounting is used by non-profits to track resources allocated to specific programs
• Match the fund type with its definition:

  Unrestricted Funds ↔️ Donations that can be used for any organizational purpose

  Temporarily Restricted Funds ↔️ Funds with donor-imposed restrictions that expire over time

  Permanently Restricted Funds ↔️ Funds with donor-imposed restrictions that never expire
• Under which fund type would a grant for a youth literacy program be tracked?

  Temporarily Restricted Fund
• Fund accounting is crucial for non-profits to demonstrate stewardship and maintain donor confidence.
• Revenue Recognition for non-profits involves recording revenue when it is earned or received
• When are donations recognized as revenue in non-profit accounting?

  When pledge is made or cash is received