Self-Study
16
Overview
Accounting
There are no prerequisites.

Course Description

A nonprofit organization is subject to different accounting standards than for-profit organizations, while also being constrained by limited funding. This combination of factors may lead to incorrect accounting and cash shortages, which can leave nonprofits in disarray in short order. This course provides guidance on how to create and operate an accounting system, close the books, and produce financial statements - all while operating in accordance with the unique nonprofit accounting standards. Also described are detailed systems of control, budgeting, and ratio analysis to maintain a proper level of control over funds.

Nonprofit Accounting is designed for financial professionals to use as a reference tool for developing accounting systems and researching the correct accounting to deal with various transactions and reports. With its complete coverage of these topics and more, it will earn a permanent place on your bookshelf.



Instructor

Steven M. Bragg, CPA

Steven M. Bragg, CPA, is a full-time book and course author who has written more than 70 business books. He provides Western CPE with self-study courses in the areas of accounting and finance, with an emphasis on the practical application of accounting standards and management techniques. A sampling of his courses include the The New Controller Guidebook, The GAAP Guidebook, Accountants’ Guidebook, and Closing the Books: An Accountant’s Guide. He also manages the Accounting Best Practices podcast.

Steven has been the CFO or controller of both public and private companies and has been a consulting manager with Ernst & Young and an auditor with Deloitte & Touche. He holds an MBA from Babson College, a Master of Finance from Bentley College, and a BA from the University of Maine (summa cum laude).



Course Specifics

Accounting
Aug 28, 2018
There are no prerequisites.
SS5146002
362
None


Compliance Information

103220
Qualifies for CA Fraud: No


Learning Objectives

Upon successful completion of this course, participants will be able to:

Chapter 1

  • Cite why the 501(c)(3) designation is valuable and what an entity with such designation cannot engage in
  • Note the criteria used to define a nonprofit organization
  • Specify an activity that a 501(c)(3) entity is likely to engage in

Chapter 2

  • Recognize how a board-designated fund differs from a net asset with donor restrictions
  • Identify an area considered part of the management and administration classification
  • Name an element included in the for-profit accounting equation that is not included in the nonprofit accounting equation
  • Cite a possible cause of a mismatch between debits and credits
  • Specify a problem with using accrual basis in a nonprofit and a step used to convert cash basis statements to accrual basis ones

Chapter 3

  • Identify the types of nonprofit financial statements, noting the comparable for-profit statements
  • Note where specific line items are recorded on the various types of financial statements, including any applicable effects of the recorded items
  • Name the IRS form where it is useful to match the statement of financial position to
  • Recognize the requirements for reporting of expenses by nature and function, noting specific examples of reportable expenses
  • Identify the various types of financial statement disclosures that are necessary to address for nonprofits
  • Cite a reason why nonprofits need to generate significant profits

Chapter 4

  • Identify what the allowance for uncollectible pledges is based on
  • Identify circumstances where a nonprofit must report donations to the IRS
  • Specify when gain is recognized instead of revenue and when the entire amount of a pledge may be recognized instead of its present value
  • Define variance power in terms of what it allows an organization to do
  • Name what portion of a contribution cannot be deducted by a donor

Chapter 5

  • Recognize the methods used to assign costs to a grant funded program, noting circumstances when a specific method should be used
  • Identify a possible treatment of income earned on unused grant funds
  • Identify the difference between a grant and a contribution
  • Define an equitable contribution base

Chapter 6

  • Specify where an unrealized gain or loss must be reported
  • Identify a situation when a nonprofit may use the equity method of accounting
  • Specify the proper recording for a purchased investment
  • Identify how an investment without a readily discernible fair value would be recorded by an institution of higher learning

Chapter 7

  • Identify elements contained in the periodic inventory system and the perpetual inventory system
  • Recognize the costing characteristics of the various cost layering methodologies, noting how assets are recorded or accounted for under each method
  • Note a key problem associated with the LIFO cost layering system
  • Identify circumstances where the specific identification method works best
  • Specify a characteristic of replacement cost when using the lower of cost or market rule

Chapter 8

  • Identify the options available for recognizing a collection, including the proper recording for an allowable election for donated works of art that are part of a collection
  • Identify when a contributed asset should be recorded as revenue or a gain
  • Specify proper treatment of an unconditional promise to give

Chapter 9

  • Recognize the requirements for different types of leases and sale-leaseback transactions, noting examples of costs associated with each
  • Note the asset and liability recognition requirements that underlie each leasing arrangement
  • Identify elections that an organization can use to simplify the accounting for leases
  • Note the disclosure requirements for the lessee as well as additional disclosures related to sale and leaseback transactions

Chapter 10

  • Recognize the characteristics and costs associated with defined benefit plans as well as the accounting for the plans, applicable settlements and curtailments, and termination benefits
  • Note the accounting requirements for a defined contribution plan
  • Recognize the presentation and disclosure requirements for retirement benefit information

Chapter 11

  • Identify types of joint costs, noting the criterion that must be met and the accounting methods that must be followed as they pertain to GAAP rules
  • Note the tests used to determine whether fundraising costs can be allocated, including the requirements of each test
  • Note the nonprofit disclosure requirements for joint costs and allocations

Chapter 12

  • Recognize situations in which accounting principles can be changed, and when retrospective application is allowed
  • Identify an example of a change of accounting estimate and the steps that would be used to correct an error in previously issued financial statements
  • Recognize the steps involved in retrospective application, noting when retrospective application to prior accounting periods is required and when it is not considered possible

Chapter 13

  • Recognize the concept of the principal market and the basis upon which fair value is determined, noting reasons why the fair value of an asset or liability may vary from actual price paid
  • Identify permitted approaches for deriving fair values, noting applicable terminology, appropriate usage, and valuation levels
  • Identify items that a nonprofit can and can’t record using the fair value option as well as applicable election requirements

Chapter 14

  • Note the accounting requirements for a contribution receivable as well as the applicable result of a contribution receivable for equity securities when the fair value option has been taken
  • Specify when a contingent liability should be disclosed but not recognized
  • Name a feature usually found in a line of credit agreement
  • Recognize the steps involved in reconciling petty cash, noting the purpose for the reconciliation

Chapter 15

  • Identify the various types of split-interest agreements, noting the accounting, measurement, and disclosure requirements for each
  • Specify the purpose of a lead interest
  • Cite a result of an irrevocable split-interest agreement

Chapter 16

  • Note the circumstances under which the reporting consolidation of two or more entities is required or allowed
  • Specify a group that is not considered to be a related party and identify a transaction between related parties

Chapter 17

  • Recognize situations in which the carryover and acquisition methods are used, noting the  intent behind the methods and the steps involved
  • Recognize how to calculate goodwill if there is no noncontrolling interest
  • Cite a result of operations of an acquiree being mostly supported by contributions
  • Name an item that cannot be recognized as an intangible asset arising from an acquisition
  • Specify when an inherent contribution arises and an event that could trigger goodwill impairment

Chapter 18

  • Name the appropriate IRS form to be filed given certain circumstances
  • Specify the use of Copy C of the W-2 and Form 1099-MISC
  • Identify the form used to file an extension of Form 990
  • Cite a nonprofit that would not file Form 990 and information not necessary to file 990-N
  • Specify the deadline for returning Form W-3 to the government
  • Identify a cost item that results in issuing a Form 1099-MISC
  • Choose the correct day for depositing payroll taxes when on a semiweekly deposit schedule

Chapter 19

  • Identify the potential implication when an uncleared check continues to not be presented
  • Cite the purpose of a reversing entry and a temporary account
  • Specify why it is necessary to close subsidiary ledger when closing the books
  • Name an effective way to review financial statements for errors
  • List an activity that cannot be delayed until after the month-end close

Chapter 20

  • Specify when budgeting for benefits can cause issues
  • List a characteristic of the target balance concept
  • Identify the use of the resource development line item and the intent of zero-base budgeting
  • Name a function not included in the management and administration budget
  • Identify an item not included in the receipts and disbursements method and an item that must be manually updated in a medium-term forecast

Chapter 21

  • Cite an advantage of applying cash from check copies and when invoice numbering guidelines are useful
  • Specify an item not included in audit of depreciation calculations
  • Name a situation where weak controls in one part of a business may be acceptable
  • Define outlier analysis
  • Identify why cash receipts are pre-numbered
  • Recognize the purpose of milestone reviews and pre-noting

Chapter 22

  • Cite an example of a document for which retention does not need to be indefinite and a policy that would not be triggered by a question on Form 990
  • Specify an action that is not an acceptable way to account for a donated collection
  • Identify the intent of requiring approval of fixed asset disposition
  • Identify why it may be necessary to prevent employees from volunteering time to a nonprofit employer

Chapter 23

  • Define vertical analysis and horizontal analysis
  • Recognize how a nonprofit with a lot of inventory should measure its liquidity
  • Specify the target of the fundraising effectiveness ratio and what is being compared in the days’ sales in accounts receivable measurement


Table of Contents

Chapter 1 – Overview of the Nonprofit Entity

Learning Objectives

Introduction

Definition of a Nonprofit Entity

Nonprofit Organizational Structure

Summary

Chapter 1 – Review Questions

Chapter 2 – Basic Nonprofit Accounting Concepts

Learning Objectives

Introduction

Double Entry Bookkeeping

The Journal Entry

The Accounting Equation

The Chart of Accounts

The Accrual Basis of Accounting

The Cash Basis of Accounting

The Modified Cash Basis of Accounting

Converting Cash Basis to the Accrual Basis

Generally Accepted Accounting Principles (GAAP)

Net Assets

Unrestricted Net Assets

Temporarily Restricted Net Assets

Permanently Restricted Net Assets

Net Assets Summary

The Release from Restriction Concept

Inter-Fund Receivables and Payables

Board-Designated Funds

Program Identification

The Management and Administration Classification

The Fundraising Classification

Bookkeeping Concerns

Case Study

Summary

Chapter 2 – Review Questions

Chapter 3 – Nonprofit Financial Statements

Learning Objectives

Introduction

The Statement of Financial Position

The Statement of Activities

The Statement of Cash Flows

The Direct Method

The Indirect Method

How to Prepare the Statement of Cash Flows

The Statement of Functional Expenses

Financial Statement Disclosures

Summary

Chapter 3 – Review Questions

Chapter 4 – Revenue Accounting

Learning Objectives

Introduction

Types of Revenue

Promises to Give

Pass-Through Contributions

Exchange Value

Transfers of Assets

Discounts from Revenue

Sales Taxes

The Allowance for Uncollectible Pledges

Restricted Fund Releases

Revenue Journal Entries

Special Reporting Considerations

Revenue Recordkeeping

Revenue Disclosures

Summary

Chapter 4 – Review Questions

Chapter 5 – Government Grants

Learning Objectives

Introduction

Overview of Government Grants

Grant Accounting

Income from Government Grants

Credits on Expenditures

Grant Reporting

Summary

Chapter 5 – Review Questions

Chapter 6 – Investment Accounting

Learning Objectives

Introduction

Contributed Investments

Purchased Investments

Subsequent Measurement of Investments

Gains and Losses on Investment

The Equity Method of Accounting

Investment Disclosures

Summary

Chapter 6 – Review Questions

Chapter 7 – Inventory Accounting

Learning Objectives

Introduction

The Periodic Inventory System

The Perpetual Inventory System

Inventory Cost Layering Overview

The First in, First Out Method

The Last in, First Out Method

The Specific Identification Method

The Lower of Cost or Market Rule

Inventory Disclosures

Summary

Chapter 7 – Review Questions

Chapter 8 – Fixed Asset Accounting

Learning Objectives

Introduction

Initial Recognition of Fixed Assets

The Capitalization Limit

Restrictions on Contributed Assets

Valuation of Contributed Assets

Valuation of Contributed Services

Valuation of Art, Historical Treasures, and Similar Items

Depreciation of Fixed Assets

Depreciation Accounting Entries

Accumulated Depreciation

Asset Impairment

Recordation of Fixed Assets

Fixed Asset Disclosures

Summary

Chapter 8 – Review Questions

Chapter 9 – Lease Accounting

Learning Objectives

Introduction

Overview of Leases

Capital Lease Criteria

Lease Reassessment

Accounting for Leasehold Improvements

Special Lease Terms

Operating Leases

Operating Lease Treatment by Lessee

Capital Leases

Capital Lease Treatment by Lessee

Sale-Leaseback Transactions

Sale-Leaseback Treatment by Lessee

Lease Disclosures

Summary

Chapter 9 – Review Questions

Chapter 10 – Pension Plan Accounting

Learning Objectives

Introduction

Overview of Retirement Benefits

Defined Benefit Plans

Expense Attribution for Delayed Vesting

Discount Rates

Settlements and Curtailments

Termination Benefits

Combined Pension Plans

Defined Contribution Plans

Presentation of Retirement Benefit Information

Retirement Benefit Disclosures

Defined Benefit Plan Disclosures

Defined Contribution Plan Disclosures

Summary

Chapter 10 – Review Questions

Chapter 11 – Joint Costs and Allocations

Learning Objectives

Introduction

Costs of Activities that Include Fundraising

Allocations

Disclosures

Summary

Chapter 11 – Review Questions

Chapter 12 – Accounting Changes and Error Corrections

Learning Objectives

Introduction

Changes in Accounting Principle

Changes in Accounting Estimate

Changes in Reporting Entity

Correction of an Error in Previously Issued Financial Statements

Corrections Related to Prior Interim Periods

Summary

Chapter 12 – Review Questions

Chapter 13 – Fair Value

Learning Objectives

Introduction

The Fair Value Concept

Fair Value Differences from Actual Prices Paid

Fair Value Measurement Approaches

Fair Value Option

Summary

Chapter 13 – Review Questions

Chapter 14 – Other Accounting Topics

Learning Objectives

Introduction

Petty Cash

Receivables

Contingent Liabilities

Line of Credit

Disclosures

Summary

Chapter 14 – Review Questions

Chapter 15 – Split-Interest Agreements

Learning Objectives

Introduction

Split-Interest Agreements

Types of Split-Interest Agreements

Accounting for Split-Interest Agreements

Initial Measurement

Ongoing Measurement

Termination

Classification of Net Assets

Disclosures

Summary

Chapter 15 – Review Questions

Chapter 16 – Affiliated Organizations

Learning Objectives

Introduction

Affiliated Organizations

Special Purpose Entities

Noncontrolling Interests

Related Parties

Disclosures

Revenue Sharing

Consolidated Financial Statements

Noncontrolling Interests

Related Party Transactions

Summary

Chapter 16 – Review Questions

Chapter 17 – Mergers and Acquisitions

Learning Objectives

Introduction

The Nonprofit Merger

The Nonprofit Acquisition

Identifiable Assets and Liabilities, and Noncontrolling Interests

Goodwill Calculation

Contribution Received

Presentation Issues

Goodwill Testing

Disclosures

Merger Disclosures

Acquisition Disclosures

Summary

Chapter 17 – Review Questions

Chapter 18 – Nonprofit Tax Reporting

Learning Objectives

Introduction

Overview of the Form 990

The Form 990

The Form 990-EZ

The Form 990-N

The Form 990-T

The Form 1099

The Form W-2

Form W-3

Payroll Taxes

Social Security Tax

Medicare Tax

Types of Tax Deposit Schedules

The Form 941

Summary

Chapter 18 – Review Questions

Chapter 19 – Closing the Books

Learning Objectives

Introduction

Journal Entries

The Accruals Concept

Adjusting Entries

Reversing Entries

Common Adjusting Entries

Closing Entries

Prior Closing Steps: Update Reserves

Core Closing Steps: Issue Customer and Donor Invoices

Core Closing Steps: Reconcile the Bank Statement

Core Closing Steps: Calculate Depreciation

Core Closing Steps: Accounts Payable

Core Closing Steps: Review Journal Entries

Core Closing Steps: Reconcile Accounts

Core Closing Steps: Close Subsidiary Ledgers

Core Closing Steps: Create Financial Statements

Core Closing Steps: Review Financial Statements

Core Closing Steps: Accrue Tax Liabilities

Core Closing Steps: Close the Month

Core Closing Steps: Add Disclosures

Core Steps: Issue Financial Statements

Delayed Closing Steps: Issue Invoices

Delayed Closing Steps: Closing Metrics

Delayed Closing Steps: Document Future Closing Changes

Delayed Closing Steps: Update Closing Procedures

Summary

Chapter 19 – Review Questions

Chapter 20 – Nonprofit Budgeting

Learning Objectives

Introduction

The Revenue Budget

The Management and Administration Budget

The Fundraising Budget

Program and Grant Budgets

The Compensation Budget

The Compensation Budget

Treatment of Hourly Pay and Overtime

The Benefits Budget

Budget Recasting

Budget Linkages

Cash Forecasting

The Short-Term Cash Forecast

The Medium-Term Cash Forecast

Summary

Chapter 20 – Review Questions

Chapter 21 – Accounting Controls

Learning Objectives

Introduction

The Proper Balance of Control Systems

Control Principles

Constructing a System of Controls

Cash Controls

Fixed Asset Controls

Payables Controls

Payroll Controls

Summary

Chapter 21 – Review Questions

Chapter 22 – Nonprofit Policies

Learning Objectives

Introduction

General Accounting Policies

Cash

Fixed Assets

Payables

Payroll

Nonprofit-Specific Policies

Donor Receipts

Donated Assets

Investments

Operations

Joint Ventures

Lobbying and Political Campaigns

Tax Filings

Summary

Chapter 22 – Review Questions

Chapter 23 – Analysis of a Nonprofit’s Financial Health

Learning Objectives

Introduction

The Auditor’s Report

Horizontal Analysis

Vertical Analysis

Expense Proportions Analysis

Fundraising Effectiveness Ratio

Revenue Concentration Analysis

Traffic Light Revenue Analysis

Traditional Ratio Analysis

Current Ratio

Quick Ratio

Days Sales in Accounts Receivable

Days Sales in Inventory

Days Payables Outstanding

Free Cash Flow

The Profitability Conundrum

Summary

Chapter 23 – Review Questions

Review Question Answers and Rationales

Glossary

Index

Final Examination

Answer Sheet

Course Evaluation



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