CHAPTER 11

Although an activity statement includes revenues & expenses as an income statement would, it is more comprehensive, showing all changes in net assets. It uses terms Change in Net Assets or Change in Equity, rather than net income. Thus the Activity Statement includes info that for-profits show in the Income Statement as well as info that would be contained in a for-profit organization’s Statement of Changes in Owner’s Equity. Income statement=revenues/expenses, gains/losses

VHWOs must not only report information by functional class, but also by natural classification such as salaries, rent, & depreciation. The disclosure for VHWOs must be in the form of a matrix in a separate financial statement, the Statement of Functional Expenses - discloses program svcs separately from support svcs. Program svcs are the direct areas that result in providing svcs (or goods) that achieve the org’s mission. Admin & fundraising are support svcs

an accounting entity with a self-balancing set of accounts for recording assets, liabilities, the fund balance, and changes in the fund balance. Separate accts are maintained for each fund to ensure that the limitations and restrictions on the use of resources are observed. Though the fund concept involves separate acctg records, it does not entail the physical segregation of resources.  Fund accounting is basically a mechanism to assist in exercising control purpose

Varieties of funds exist, depending on types of restrictions & needs. Funds are divided into two main categories—unrestricted and restricted. Virtually all not-for-profit organizations have a current unrestricted or general fund. The main categories of restricted funds are donor restricted versus board restricted. Donor-restricted funds are funds that exist to comply with various requirements donors have placed at the time of donation.

Three types of events can occur that concern more than one fund in an organization. One is a loan, where one fund borrows money from another. A second is the sale of services, where one fund consumes services provided by another fund. The third type of event is a transfer, where one fund gives resources to another

None. Under current accounting rules, all not-for-profit organizations are required to depreciate their buildings and equipment.

Contributions, gifts, or donations are recorded at their fair market value at the time of donation. They are included with the organization’s revenue, although they are often called support. When the donated resources are used up, they are treated as expenses. They are reported as support when the promise is made if it is unconditional or when all conditions have been met...SEE NOTES

investments in equity securities that have readily determinable fair values and all debt securities are reported at their fair value in the statement of financial position (balance sheet). Gains and losses, both realized and unrealized, on investments are shown in the activity statement. If a security is sold during the year, it does not show up the gain or loss has been realized and the security will not appear on balance sheet at the end of the period, b/c it is no longer owned

investor-owned report their securities as held to maturity; trading securities, or available for sale. NP org.s report all debt and equity securities are reported at fair value. Gains and losses are included in changes in net assets. Gains and losses are included in unrestricted net assets unless restricted by donor or law.

Yes, depreciation of buildings and equipment is required for health care organizations. Unless superseded by the health care accounting and audit guide or clearly inappropriate, health care organizations follow GAAP used by other for-profit and not-for-profit organizations. GAAP requires depreciation for both, thus health care organizations must employ depreciation.