Accounting Recording of Non-Profit Organisation Video Lecture | SSC CGL Tier 2 - Study Material, Online Tests, Previous Year

okay we are going to look at example
problem 16 5 on page six eighty and 681
of your ninth ninth edition a
governmental and nonprofit accounting
theory and practice book and what we're
going to do is go through some of the
transactions in problem 16-5 and talk a
little bit about the normal transactions
that a nonprofit organization will make
so if you look at number one there we
have a listing of pledges and we have
seven hundred thousand for general
operations we have six hundred thousand
for building addition two hundred
thousand for aid to the elderly five
hundred thousand as an endowment to be
used for assisting handicapped people
pledges so pledges are seven or fifty
thousand free to the handicapped nine or
fifty thousand for building additions
and 150 thousand for general operations
in future years our past history which
is what we're going to be basing our on
collectibles on is ten percent one of
the things you're going to notice in
nonprofit accounting is that a good
portion of the stuff anymore is like
for-profit accounting the main
differences have to do with restrictions
on our assets so we can have
unrestricted assets which means it's
spent at the discretion of the charity
or the nonprofit we have temporarily
restricted which means the donation is
for a specific purpose and once that
purpose is met the funds are released
and then finally we have permanent
restricted and that's generally going to
be like your endowments so where the
word the principle is protected and the
interest is used for the purpose
designated by the endowment so let's
look at that first entry here we
received cash of two million dollars so
I'm going to type in my two million
dollars I can come alright zeros there
we go okay we also receive pledges of a
million eight hundred fifty thousand
so again this would be just like a
receivable for our for for-profit
enterprise so we also he'll label my
columns here we have debit of course and
credit again everything the same as a
for-profit company s in receivables we
have allowances for uncollectible
accounts so our 10% pledge on
collectability estimate we're going to
set up that allowance at this point in
time okay so we are going to do a entry
to set up our allowance and our
allowance is going to be a credit for
one hundred and eighty five thousand
dollars okay we then have our
unrestricted support which is going to
be our seven hundred thousand for
general operations and I can tell you as
somebody who has spent most of their
life doing that that is the nonprofit
organizations best friend is
unrestricted contributions is you can
use those for salaries you can use those
for whatever purpose you need so those
are oftentimes sometimes be the hardest
to get but it's also the most important
for you to get our next category we're
going to use is the permanently
restricted well our permanently
restricted is going to consist of that
endowment so we have a five hundred
thousand dollar endowment which can only
be used for assisting handicapped and
generally so where most people set up an
endowment they're using the interest in
the earnings on that instead of spending
the principal finally we have our
temporarily restrictions which we will
see we are going to record the rest of
them so two four six five zero zero zero
okay so and we can check we've got three
million 850,000 in that tree so our
temporary restricted contributions and I
can break that out if you want we can
break it out into you know the different
things for the building additional six
hundred thousand for the building
edition two hundred thousand eight for
the elderly we can break those out and
you've probably would in real life
you'll break it down by maybe by
category of how it fits best for you but
for this purpose we're just going to
record the temporary restrictions on the
contributions okay next we are going to
take care of our building we've done a
building edition at a cost of a million
five hundred thousand the six hundred
thousand received and our first
transaction was paid to the contractor
and the balance owed is on a five-year
twelve percent no so again this works
just like a for-profit company basically
we are going to record our building at a
main five hundred thousand okay so
that's easy enough right and then we are
going to record the payment of the cash
our cash ups our cash we paid with six
hundred thousand dollars so we're gonna
credit cash just like we would any other
expense or expenditure the balance then
of nine hundred thousand dollars is
going to know it's payable so that's
going to be classified as a balance
sheet liability okay the other thing we
do that's a little different and
nonprofit counting is we do transfers
between funds and what's happening here
is we have our since we spent that six
hundred thousand that was temporarily
restricted that restriction has been
lifted so we're gonna have a
reclassification out of six hundred
thousand and reclassification in
of 600,000 one too many zeroes oh sorry
about that and what that does is it
transfers the funds from our temporarily
restricted fund to our unrestricted so
we've released that restriction once the
purpose of that fund has been met we
release it and those funds are no longer
restricted okay next we have some
expenditures we have unrestricted
resources that we've used from our
unrestricted funds we have fundraising
one hundred thousand general and admin
of eighty thousand aid to children
program a of three hundred twenty
thousand we have from restricted sources
we have a to the elderly two hundred
thousand we have aid to handicapped four
thousand we have we paid a tenth of the
note principle ninety thousand dollars
we have six months interest of fifty
four thousand and endowment investments
of four hundred fifty thousand okay so
what we're going to do here is we're
just going to record those entries and
again this goes pretty much like our
for-profit accounting we're just going
to make some we just know where the
money's coming from or what category is
coming out of so our expenses for
fundraising we're gonna record for a
hundred thousand dollars a debit our
general and admin again coming out of
unrestricted is going to be eighty
thousand then we have our a to children
program a of three hundred twenty
thousand then okay then we have our
expenses for program B of two hundred
thousand we have our expenses for
program C of four hundred thousand our
need one more zero there sorry about
that
then we record our interest expense just
like always 54,000 it's gonna be
interest expense we have our principle
payment of 90,000 and our investment so
we're taking some of our cash that we
had received from our endowment and
we're investing that into could be CDs
it could be whatever type of investment
that you would choose our credit then
for cash is a man
six hundred ninety four thousand again
that reclass acai that pays out the cash
that we spent our reclassifications in
this particular case is going to be six
hundred thousand and our six hundred
thousand reclass is coming from the
transfer of our temporarily restricted
funds of aid to the elderly and aid to
the handicapped since we spent on those
particular programs we can release those
restrictions so we're transferring those
from temporarily restricted to
unrestricted so we're transferring that
out so we can pay them off and those
restrictions are lifted money spent so
those are getting work for program B and
for program C next we did a equipment
costing equipment purchase costing
$300,000 again this is just like a
for-profit company $300,000 increased
equipment $300,000 decreased to cash no
difference there no other changes that
we have to make since the funds came out
of there if we were transferring funds
out of restricted then we would have to
we would have to make our
reclassifications in and out finally we
had in number five here her for this
portion of it we are going to make a
sale of equipment for forty thousand
dollars the original cost of the
equipment was
thousand so we're gonna credit our
equipment for a hundred thousand we have
our accumulated depreciation of sixty
five thousand and then our gain will be
the difference which in this case is
going to be five thousand so we're going
to record a five thousand dollar gain
unrestricted gain on our equipment sale
and that is it for this particular
portion continue on to Part B