Project: Nonprofit Accounting Guidelines
Overview
The second final project for this course is the creation of an accounting workbook and accompanying memo to management.
Unlike traditional businesses, the purpose of nonprofit organizations is to provide services to society. The lack of profit motive and the focus on providing services creates the need for a different kind of accounting and accountability. Revenue sources are different, with nonprofits relying on donations and fees for services.
Resources are also accounted for differently because of restrictions often placed on donations. It is the responsibility of the nonprofit accountant to provide accountability for these funds through financial reports.
By working through this project, you will understand how revenues and expenses are accounted for in nonprofits. Using this information can also help you analyze the financial position of the organization. This analysis can be used to assess financial strengths and weaknesses.
It is important to note that some types of organizations- universities and healthcare organizations, for example- can be for-profit, nonprofit, or government operated. As an accountant, you need to understand how the statements for these organizations would be different under different models. In the accounting workbook and memo, you will use course-provided information to (1) analyze transactions for a nonprofit in accordance with industry standards; (2) create and use financial statements to assist in the anal?sis of the organization's finanÐial position; and (3) communicate the results of operations to management.
In this assignment, you will demonstrate your mastery of the following course outcomes:
- Prepare journal entries, financial statements, and supporting documentation that impact reporting for nonprofit and governmental entities using appropriate accounting standards
- Evaluate governmental and nonprofit accounting statements in determining the fiscal position of various entities using appropriate tools of the discipline
- Select accounting methods appropriate to the differentiated needs of governmental and nonprofit organizations
- Determine appropriate strategies for effectively communicating the differences between private sector, governmental, and nonprofit reporting to stakeholders
Prompt
You are the accountant for a nonprofit organization. Your job requires that you prepare journal entries, post to ledgers, and prepare financial statements. Using the Final Project Two Case Study document and Final Project Two Student Workbook spreadsheet provided, you will prepare an accounting workbook, which includes supporting journals. The supporting journals will be used in preparation of the financial statements. Finally, you will prepare a three- to five-page memo explaining the reports to management. In your memo, you will also discuss how the statements would be different if your organization was private for-profit or government operated.
Specifically, the following critical elements must be addressed:
I. Prepare an accounting workbook with supporting journals.
a) Analyze all transactions in the Final Project Two Case Study document and Final Project Two Student Workbook spreadsheet to determine
proper handling.
b) Record all journal entries.
c) Use journal entries to prepare financial statements.
II. Prepare a memo to management
a) Analyze the results of operations, including what the results tell the readers about the organization.
b) Explain what the statements tell about the strengths and weaknesses of the organization's financial position.
c) Discuss how the accounting and statements would be different if the organization was for-profit.
d) Discuss how the accounting and statements would be different if the organization was government-operated.
Project: Case Study
Use of the Workbook
For this Project, you will use the Project Student Workbook Excel spreadsheet provided for you.
If you would like a refresher course on using various features of Excel, sign in to Atomic Learning and type "Excel" in the search box. This will provide you with options to select the specific level of training that you need (i.e., intro, intermediate, or advanced) and the specific version of Excel that you have (i.e., 2011, 2013, etc.). The trainings are broken down into small, meaningful chunks. Therefore, you should be able to find specific topics at each level that will meet your needs.
SPARK Organization
SPARK was incorporated as a nonprofit voluntary health and welfare organization on January 1, 2015. During the fiscal year ended December 31, 2015, the following transactions occurred:
1. A business donated rent-free office space to the organization that would normally rent for $16,000 a year.
2. A fund drive raised $120,000 in cash. A state government grant of $50,000 was received for program operating costs.
3. An administrator was hired to administer the program services and support services of the organization. The administrator was paid $92,000 for the year, which included fringe benefits. Part-time clerical help was paid $26,000 for the year. At year-end, $18,000 of the salaries and wages remained unpaid.
4. Pledges of $100,000 were received for construction of a new building. The pledges are payable over the following five fiscal years. The discounted value of the $80,000 in pledges expected to be received in years 2016-2019 is $73,400.
5. Office equipment was purchased for $5,000. The useful life of the equipment is estimated to be five years. Office furniture with a fair value of $7,600 was donated by a local office supply company. The furniture has an estimated useful life of 10 years. Furniture and equipment are considered unrestricted net assets by SOLVE.
6. Telephone expense for the year was $5,600, printing and postage expense was $10,000 for the year, and supplies expense was $2,100 for the year. At year-end, an immaterial amount of supplies remained on hand and the balance in accounts payable was $3,800.
7. Volunteers contributed $15,000 of time to help with answering the phones, mailing materials, and various other clerical activities.
8. It is estimated that all of the pledges made for the 2015 year will be collected. Depreciation expense is recorded for the full year on the assets recorded in item 5.
9. Expenses were allocated in the following percentages: public health education, 35%; community service, 25%; management and general, 20%; and fundraising, 20%.
10. Net assets were released to reflect satisfaction of state grant requirements that the grant resources be used for program purposes.
11. All nominal accounts were closed to the appropriate net asset accounts.
Required
A. Make all necessary journal entries to record these transactions. Expense transactions should be initially recorded by object classification; in entry 10, expenses will be allocated to functions.
B. Prepare a statement of activities for the year ended December 31, 2014.
C. Prepare a statement of financial position for the year ended December 31, 2014.
D. Prepare a statement of cash flows for the year ended December 31, 2014.
E. Prepare a statement of functional expenses for the year ended December 31, 2014.
This case study is adapted from Problem 13-8 in Reck, J., Lowensohn, S., & Wilson, E. (2013). Accounting for governmental and nonprofit entities (16th ed.). New York, NY: McGraw-Hill/Irwin.
Attachment:- Project_Student_Workbook.xlsx