Saint Louis University
School of Accountancy and Business Management
Mary Height Campus, Baguio City
Accounting for Non- Profit Organizations
(Outline of research with BBCCC Financial Statements Attached)
Accounting 303 MWF 2:30-3:30 D801
Accounting For Non Profit organizations – Group 10
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ACCOUNTING FOR NON-PROFIT ORGANIZATION
This chapter will focus upon for four types of not-for-profit / service organizations, namely:
1. The professional organization
2. The privately organized education institutions – school, college, university
3. The private organized hospital; and
4. The cooperative
What is a non-profit organization?
A non-profit organization is an entity that is operated for the benefit of society as a whole rather than for the benefit
of an individual proprietor or a group of partners or shareholders. A non-profit organization strives only to obtain
revenue sufficient to cover its expenses. Thus, the concept of income is not meaningful.
Non-profit organizations constitute a significant segment of our society.
Some examples are:
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
Voluntary health and welfare organizations:
Schools, colleges and universities
Hospitals
Cooperatives
Labor unions
Performing arts organizations
Foundations
Religious organizations
Country Clubs
Professional associations
Purpose of Financial Statements
The primary purpose of financial statements is to provide relevant information to meet the common interests of
donors, members, creditors and others who provide resources to not-for-profit organizations. Those external users of
financial statements have common interests in assessing
a. The services an organization provides and its ability to continue to provide those services and
b. How managers discharge their stewardship responsibilities and other aspects of their performance.
More specifically, the purpose of financial statements, including accompanying notes, is to provide information
about:
a. The amount and nature of an organization’s assets, liabilities and net assets
b. The effects of transactions and other events and circumstances that change the amount and nature of net
assets
c. The amount and kinds of inflows and outflows of economic resources during a period and the relation
between inflow and outflow
d. How an organization obtains and spends cash, its borrowing and repayment of borrowing and other factors
that may affects its liquidity
e. The service efforts of an organization
Accounting For Non Profit organizations – Group 10
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STATEMENT OF FINANCIAL POSITION
This statement provides relevant information about the liquidity, financial flexibility and interrelationship of
an organization’s asset and liabilities in order to let the external users of such be able to assess the organization’s
ability to continue providing the services, to meet obligations, and needs for external financing.
Information about the nature and amounts of different types of permanent restrictions or temporary
restrictions shall be provided either by reporting their amounts on the face of the statement or by including relevant
details in notes to financial statements. Separate line items maybe reported within permanent restrictions for
holding of :
a.
b.
assets, such as land or works of art, donated with stipulations that they be used for a specified purpose, be
preserved and not be sold or;
assets donated with stipulations that they be invested to provide permanent source of income such as gifts
that create permanent endowment funds.
Separate line items may be reported within temporarily restricted net assets or in notes to financial statements
to distinguish between temporary restrictions for:
a.
b.
c.
d.
support of particular operating activities,
investment for a specified terms,
use in specified future period, or
acquisition of long-lived assets. Donors’ temporary restrictions may require that resources be used for
specified purpose as purpose restrictions or both. Gifts called term endowments such as gifts of cash or
other assets with stipulation that they be invested to provide source of income for a specified term and that
the income be used for a specified purpose are both time and purpose restricted.
STATEMENTS OF ACTIVITIES
This statement shows the revenues, gains, expenses and losses. The primary purpose of this statement is to
provide relevant information about:
a.
b.
c.
the effects of transactions and other events and circumstances that change the amount and nature of net
asset,
the relationships of those transactions and other events and circumstances to each other, and
how the organization’s resources are used in providing various programs or services.
The information in this statement used with related disclosures and information in other financial statements,
helps donors, creditors and others to
a.
b.
c.
evaluate the organizations performance during a period,
assess an organization’s service efforts and its ability to continue provide services, and
assess how an organization’s managers have discharged their stewardship responsibilities and other
aspects of their performance. This statement use the descriptive term - change in net assets or change in
equity of the entity as a whole.
Accounting For Non Profit organizations – Group 10
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STATEMENT OF CASH FLOW
This statement provides relevant information about the cash receipts and cash payments of an organization
during a period. Although this statement may be using either of the two methods, direct and indirect, only the direct
method is illustrated below.
PROFESSIONAL ORGANIZATION
There are more than 40 professional organizations accredited by the Professional Regulation Commission. These
associations or institutions have their head offices in Metro Manila, but their chapters are found all over the country.
Their operations are generally financed by membership dues that are paid annually. Sharing of these membership
fees among the different chapters, regional councils and head office are provided for in their by-laws. Bigger
organizations have established regional councils which oversee the chapters. Each organization has its own mission
and vision and its activities shall be towards the attainment of these goals.
Their operations are characterized by having a board of directors establishing the policies and guidelines based
in the by-laws whish are implemented by means of a set of officers elected from among the members of the board.
Every year elections are conducted nationwide. Various committees are created with a chairman and members who
give their time and effort voluntarily to achieve the objectives of the organizations. Full accrual basis is used
whenever practicable, depreciation is provided but is not considered in determining the excess of receipts over
disbursements. Two kinds of net assets are commonly accounted for, unrestricted or general and restricted or
special net assets. The spreadsheet is used to summarize daily transactions in these two types of assets. An updated
list of members is a requirement for the sure accounting of annual dues in arrears to support the receivable
accounts. Collections are normally done by the chapters and monthly reports are prepared to account for the
remittances due to the head office and the regional councils. Restricted net asset are created every time collections
would include receipts for subscription to the periodic journal or for the additions or betterment of the building.
EDUCATIONAL INSTITUTIONS
The activities of an educational institution may be classified as :
a.
b.
c.
Instructional - include both resident and extension instruction, public service, organized researched and the
operation of libraries.
Administrative - auxiliary include staffing and promotion, registration and enrollment, operation of the
business office, and operation and maintenance of the educational plant
Auxiliary services include the operation of the residence halls, dining rooms, college unions and bookstores,
health centers, and athletic and cultural programs.
Revenues in support of these different activities are provided by such varied sources as contributions,
government appropriations, student fees, endowment income, and revenues from the sale of goods and
services.
There are six major fund groupings for educational institutions, namely:
1.
Current funds
Accounting For Non Profit organizations – Group 10
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2.
3.
4.
5.
6.
Loan funds
Endowment and other nonexpendable funds
Annuity funds
Plant funds, divided into unexpended plant funds, retirement of indebtedness funds and an investment in
plant section
Agency fund
Explain the accounting for non-profit organizations.
Accounting for non-profit organizations is essentially “fund accounting”. This means that the internal accounting for
many non-profit organizations is the fund which is an accounting entity with a self-balancing set of accounts
recording cash and other financial resources together with related liabilities and changes therein. Accounting is
based on FASB SFAS 116, SFAS 117, SFAS 124 and AICPA Audit and Accounting Guide for health care organizations.
Funds commonly used by non-profit organizations include the following:
1.
2.
3.
4.
5.
6.
7.
Unrestricted fund
Restricted fund
Endowment funds
Agency fund
Annuity fund and life income fund
Loan fund
Plant fund
Unrestricted Fund/ General Fund/ Current Fund
This is also known as the general fun which includes all the assets of a non-profit organization that are available for
use as authorized by the governing board and are not restricted for specific purposes. The revenue and gains of
unrestricted funds are derived from a number of sources. It is used in fund accounting.
Restricted Fund/ Restricted Current Fund/ General Fund
These are the receipts of resources that are to be used in special activities such as publication of a periodic journal or
construction of a building for the unit.
Accounting for cash contributions or donations
Cash contributions or donations are reported as revenue in the year received even though there are donor-imposed
uses or time restrictions on the donation. The entry for the cash contribution or donation is:
Cash
Contributions revenue
xxx
xxx
If the donor imposes use or time restriction, the cash contribution or donation is reported as “temporary restricted
revenue” on the statement of activities.
Accounting For Non Profit organizations – Group 10
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Accounting for “contributed materials”

recorded at fair value i.e. if a hospital receives free drugs or a university receives free operating supplies,
the entry is
Inventory
Contributions revenue
xxx
xxx
Accounting for “contributed services”
Contributed services are recognized in the statement of activities if either of the following conditions is met:
a.
The services create or enhance a non financial asset.
b.
The services require specialized skills, are provided by individuals possessing those skills and would typically
need to be purchase if not provided by donations.
Contributed services rendered by skilled individuals are recognized at the going rate for comparable employees or
contractors of the entity less any meals or other living costs absorbed by the nonprofit organization.
To increase expense and increase unrestricted revenue, contributed services is recorded as follows:
Salaries expense
Contributions revenue
xxx
xxx
Accounting for Contributed facilities
Contributed facilities are recognized at fair value either to an asset or expense account. For example, if a university
receives a new building from a generous benefactor to be used as one of its colleges, the entry is:
Building
Contributions revenue
xxx
xxx
Another example, a building is used by a university on a rental basis. However, the owner waives rental payment.
This is recorded at the fair value of the rental as follows:
Rental expense
Contributions revenue
xxx
xxx
Classifications of Expense of a nonprofit Organization
1.
Program services – these are the organizations activities that result in the distribution of goods and services
to beneficiaries, customers or members that fulfill the purposes or mission of the organization.
Accounting For Non Profit organizations – Group 10
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2.
Supporting Services – these are other expenses that include all activities of the organization other than
program services, i.e. management and general expenses, fund raising and membership development
activities.
All expense of a non profit organization is reported as unrestricted in the statement of activities. This means that
expenses are deducted only from unrestricted revenue.
What is a restricted fund?
This is used to account for assets available for current use but expandable only as authorized by the donor of the
assets. The donor may impose either “use” restriction or “time restriction” or both. Assets of the restricted fund are
not derived from the operations of the nonprofit organization.
Explain endowment of fund.
A “permanent endowment fund” is one for which the principal must be maintained indefinitely in revenue producing
investment. Only the revenue from the investments may be expended. A permanent endowment fund is also known
as “regular endowment”. A permanent endowment fund or “permanently restricted” but the revenue from the fund
is “temporarily restricted”.
A term “endowment fund” is one for which the principal may be expended after the passage of certain period or the
occurrence of an event specified by the donor. The term is “temporarily restricted”.
A “quasi-endowment fund” is a fund established by the governing board of the nonprofit organization. At the option
of the board, the principal may later be expended.
Accordingly, a quasi-endowment fund is included on “unrestricted net assets” because this is established using
unrestricted net assets.
Agency Fund

Used to account for assets held by the nonprofit organization as custodian.

Example: A university may act as custodian of cash of a student organization. The university disburses cash
as directed by the officers of the student organization.

Undistributed cash of the student organizations is reported as liability of the university's agency fund
because the university has no equity in the fund.
Annuity Fund

Established when assets are contributed to the nonprofit organization with the stipulation that the
organization shall pay specified fixed amount to a designated beneficiary periodically during a specified
period of time.

At the end of the specified period for the specified payments, the unexpended assets of the annuity fund
are transferred to the unrestricted fund, restricted fund or endowment fund as instructed by the donor.
Accounting For Non Profit organizations – Group 10
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Life income Fund

Used to account for stipulated payments to a named beneficiary during the beneficiary’s lifetime.

Only the income on the fund is paid to the beneficiary’s payment from a life income fund varies form period
to period comparing to annuity fund that is fixed.
Loan Fund

Established by colleges and university for the purpose of granting loans to students to satisfy their school
needs.

Students loans funds are generally revolving – as old loans are repaid, new loans are made for the receipts.
Plant Fund

established for land, building, and equipment

It may also include cash and investments earmarked for additions to plant or payments of liabilities
collateralized by the plant assets.

Sinking fund assets set aside for retirement of debt incurred to acquire plant assets is also included.
Components of Financial Statements of Non-Profit Organizations
1.
Statement of Financial Position – reports that “ assets should equal liabilities and net assets”
2.
Statement of Activities – reports the “changes in net assets” and their revenue, gains, expenses and losses.
This is equivalent to income statement in commercial accounting.
- It reports gross amount of revenue and expenses, except that investment revenue may be reported net of
expenses, and gains and losses on disposals of plant assets may be reported net.
- It reports expenses by functional classification such as program services and supporting services.
3.
Statement of Cash Flows
4.
Notes to Financial Statements
5.
Statement of Functional Expenses – required only to voluntary health and welfare organizations – this
reports expenses both by function (program and supporting ) and natural classification (salaries,
depreciation etc. )
Classifications of Net Assets

reported in the statement of Financial Position
1. Unrestricted net assets – assets in the “unrestricted fund”.
2. Temporarily restricted net asset – assets in the restricted fund, loan fund, term endowment fund,
annuity fund, life income fund and plant fund.
Accounting For Non Profit organizations – Group 10
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3. Permanently restricted net assets – “permanently endowment fund”
Unconditional Promises Treatment

Reported in the period pledges are made not in the period of cash collection.

Contribution will not be received until next year, the contribution will be reported as increase in
temporarily restricted net assets for the current year because of time restriction.

Conditional promise to give is considered unconditional if the possibility that the condition will not be met
is remote.
Treatment of Re classifications of Net assets
Example: In prior year, a benefactor made a contribution to a private nonprofit university with the stipulation that
the donation be used for faculty travel during the current year.

This contribution is reported under temporarily restricted net assets in the prior year.

When the contribution is used for faculty travel in the current year, it is reported as “reclassification” in the
current year's statement of activities. Re-classifications are reported in the statement of activities as “net
assets released from restrictions”.

This reclassification is reported in the current year as negative amount for temporarily restricted net assets
and positive amount for restricted net assets.

The travel expense is reported in the current year's statement of activities as deduction from unrestricted
net assets. All expenses are decrease in unrestricted net assets.

The use of the contribution for faculty travel has no effect on unrestricted net assets at the current year end
because the effect is offsetting, meaning, increase in unrestricted net assets upon reclassification from
“temporarily restricted to unrestricted” and decrease in unrestricted net assets when the contribution is
used or expended.
Classifications of Cash flow or Non Profit Organizations in the Cash Flow Statements
1.
Operating Activities – includes “unrestricted” cash contributions, unrestricted revenues and expenses.
2.
Investing activities – includes cash flows from acquisition and disposal of property, plant and equipment,
investments, and other long-term assets.
3.
Financing activities – includes temporarily or permanently “restricted” cash contributions and cash flows
from borrowings and repayment of borrowings.
Accounting For Non Profit organizations – Group 10
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Financial Statements Pro- Forma Forms
STATEMENT OF FINANCIAL POSITION
XXX Organization
Statement of Financial Position
December 31, 20x1 and 20x2
(In thousands)
ASSETS
Cash and cash equivalent
Receivables
Inventories and prepaid expenses
Assets restricted to investment in building and equipment
Land, building and equipment
TOTAL ASSETS
LIABILITIES AND NET ASSETS
Vouchers payable
Refundable advances
Long-term debt
TOTAL LIABILITIES
Net assets:
Unrestricted
Temporarily restricted
Permanent restarted
TOTAL NET ASSETS
TOTAL LIABILITIES AND NET ASSETS
20X1
P xxx
xxx
xxx
xxx
xxx
P XXX
20X2
P xxx
xxx
xxx
xxx
xxx
P XXX
P xxx
xxx
xxx
P XXX
P xxx
xxx
xxx
P XXX
P xxx
xxx
xxx
P XXX
P XXX
P xxx
xxx
xxx
P XXX
PXXX
Accounting For Non Profit organizations – Group 10
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STATEMENT OF ACTIVITIES
XXX Organization
Statement of Activities
For the year ended December 31, 2ox1
Temporarily
Unrestricted
Restricted
Revenues, gains and other support:
Contributions
Fees
Total
Expenses and losses
Program A
Program B
Management and General
Fund Raising
Total
Change in net assets
Net assets at beginning of year
Net assets at end of year
P xxx
xxx
P xxx
P xxx
xxx
xxx
xxx
P xxx
P xxx
xxx
P xxx
P xxx
P xxx
xxx
P xxx
Permanently
Restricted
P xxx
P xxx
xxx
P xxx
Accounting For Non Profit organizations – Group 10
Total
P xxx
xxx
P xxx
P xxx
xxx
xxx
xxx
P xxx
P xxx
xxx
P xxx
Page 11 of 39
Statement of Cash Flows
XXX Organization
Statement of Cash Flow
For the year ended December 31, 20X1
Cash flows from operating activities:
Cash received from members and contributors
Cash received from service recipients
Cash paid for:
Program A
Program B
Fund raising
Cash paid to employees and suppliers
Net cash from operating activities
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year
P xxx
xxx
xxx
xxx
xxx
(xxx)
(xxx)
P xxx
xxx
P xxx
Reconciliation of change in net assets to net received from operating activities:
Change in net assets
P xxx
Adjustments to reconcile change in net asset to
net cash from Operating activities:
Depreciation
xxx
Decrease in refundable advance
(xxx)
Increase in vouchers payable
xxx
Increase in receivable
xxx
Increase in inventories and prepaid expenses
xxx
Net cash flow from operating activities
P xxx
LOAN FUNDS




Consist of resources that are available for loans to students.
Originate from gifts, they may be built up over a period of years from student fees for such purpose or for
transfers from endowment fund whose income is available for such purpose.
Can be made with or without interest depending upon the conditions established by those providing loan
the loan fund.
Nonexpendable uncollectible loans, fund administrative expenses, and losses on the sale of fund
investments, and as a result of credits arising from interest on loans, income from fund investments , and
gains on sale of fun investment.
Accounting For Non Profit organizations – Group 10
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Transactions related to loan of NPO universities:
1. Receipt of cash gift to be used for loans to students, P50,000.
Cash
Loan Fund net assets
2.
3.
4.
5.
6.
Purchase of securities for P25,000 which includes accrued interest of P600.
Investment
Accrued Interest
Cash
Loans to students, P20,000.
Notes Receivables
Cash
Collections of interest on investments, P1,500.
Cash
Accrued Interest
Loan Fund net assets
Collection of loans with interest of P150, P7,650.
Cash
Notes Receivable
Loan Fund net assets
Uncollectible loans written off, P300.
Loan Fund net assets
Notes Receivable
50,000
50,000
25,000
600
25,600
20,000
20,00
1,500
600
900
7,650
7,500
150
300
300
Resources are balanced by the account Loan Fund Balance/ Loan Fund Net Assets.
Note: The Accounts are hypothetical In nature to illustrate the entries.
NPO University
Loan Fund
Statement of Financial Position
June 30, 20B
ASSETS
Cash
Investments
Notes Receivable
TOTAL ASSETS
P13,550
25,000
12,200
P 50,750
LIABILITIES AND NET ASSETS
TOTAL NET ASSETS
P 50,750
Accounting For Non Profit organizations – Group 10
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NPO University
Loan Fund
Statement of Activities
For the year ended June 30, 20B
Revenues:
Interest on investments
Interest on loans
Less: Expenses/ losses:
Uncollectible loans written off
Excess of revenue over expenses
P900
150
1,050
300
P 750
NPO University
Loan Fund
Statement of Cash Flows
For the year ended June 30, 20B
Cash from operating activities:
Receipts of gifts
Excess of receipts over expenses
Net cash from operating activities or net assets
P 50,000
750
P50,750
ENDOWMENT AND OTHER NONEXPENDABLE FUNDS
 Formed when cash or other properties are transferred to the institution provided that only income
produced by such resources can be used for the benefit of the institution.
 Unrestricted endowment is undependable; although it may change as a result of the sale of restrictions are
placed on the use of fund income by the institution. Income becomes available to the unrestricted current
fund.
 Restricted endowment is when the use of the fund income is limited to certain objectives. Income is
transferred to the appropriate restricted current fund or to the plant fund.
 Endowments are created by transfer of assets directly to the institution.
 Funds temporarily functioning as an endowment are resources not currently required by unrestricted
current fund may be transferred out of this fund to be administered as an endowment until the resources
are required for alternative use.
 In maintaining a single set of books for the endowment fund group, investments and other property items
should be identified with specific endowments, and separate endowment fund balances should be reported
for each endowment.
 Earnings don’t need to be reflected on the books for the endowment funds that may be entered directly on
the books of the funds receiving the earnings.
Accounting For Non Profit organizations – Group 10
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Transactions related to endowment fund:
1. Receipt of cash from donor in establishment of Endowment Fund A, P1,000,000. No restrictions are made as
to use of endowment income.
Cash
1,000,000
Endowment Fund A balance
1,000,000
2. Receipt of securities from 2 donors in establishment of Endowment Funds B and C. Endowment Fund B10,000 shares of X Co. ordinary shares, value on date of transfer is P715,000. Endowment Fund C-2,500
shares of Y Co. preference shares, value on date of transfer P245,000. No restrictions are made as to use of
endowment income.
Investments-ordinary shares
715,000
Investments-preference shares
245,000
Endowment Fund B balance
715,000
Endowment Fund C balance
245,000
3. Pooling of Endowment Funds A, B, C. Endowment fund balances were restated in terms of market values of
securities as date of pooling as follows: Ordinary shares market value, P750,000 and Preference shares
market value-P250,000.
4.
5.
6.
7.
8.
Pooled Cash
1,000,000
Pooled investments- ordinary shares
750,000
Pooled investments- preference shares
250,000
Cash
1,000,000
Investments-ordinary shares
715,000
Investments-preference shares
245,000
Endowment Fund B balance
35,000
Endowment Fund C balance
5,000
Purchases of P900,000 of Z Co. bonds at a price of 105.
Pooled investments- bonds
900,000
Pooled investments- unamortized bond premium
45,000
Pooled Cash
945,000
Collection of interest and dividends on pooled investments, P107,500.
Pooled Cash
107,500
Undistributed pooled income
107,500
Premium amortization on pooled investments, P2,250.
Undistributed pooled income
2,500
Pooled investments- unamortized bond premium
2,500
Distribution of income on pooled endowments to unrestricted and restricted current funds: Endowment
Fund A: 1,000,000/2,000,000 x 105,000 or P52,500. Endowment Fund B: 750,000/2,000,000 x 105,000 or
P30,375. Endowment Fund C: 250,000/2,000,000 x 105,000 or P13,125.
Undistributed pooled income
105,000
Pooled Cash
105,000
Sale of Y Co. preference shares for P260,000.
Pooled Cash
260,000
Pooled investments- preference shares
250,000
Gains and losses on pooled investments
10,000
Accounting For Non Profit organizations – Group 10
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9.
Receipt of gift of properties to be used as a dormitory. Net income after recognizing an annual charge for
depreciation of P10,000 is to be used for certain restricted purposes. Appraised values of properties on the
date of gift: Land- P125,000, Buildings- P175,000.
Land
125,000
Buildings
175,000
Endowment Fund D balance
300,000
10. Receipt of cash from unrestricted current fund to be used as an endowment fund until alternative use is
authorized, P50,000.
Cash
50,000
Principal temporarily functioning as Endowment Fund E
balance
50,000
11. To recognize resources of P400,000 held by trustee as an endowment. No restrictions are made as to use of
endowment income.
Fund held by trustee
400,000
Endowment Fund F balance
400,000
12. Amount receivable from restricted current fund representing recovery of depreciation on endowment
properties (dormitory), P10,000.
Due from restricted current fund
10,000
Accumulated depreciation- buildings
10,000
Revenues and expenses relating to operations of the properties are reported in the restricted current funds.
PLANT FUNDS
 Formed when cash or other properties are transferred to the institution subject to the requirement that
specified payments be made to a designated beneficiary during his lifetime. sometimes included with
endowment funds for accounting and reporting purposes.
 Balances are increased by gifts subject to annuity agreements, gains on the sale of annuity fund assets,
payments to annuitants, and asset transfers.
Accounting For Non Profit organizations – Group 10
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NPO University
Endowment and Other Nonexpendable Funds
Statement of Financial Position
June 30, 20B
ASSETS
Cash
Due from restricted current funds
Pooled cash
Pooled investments:
Ordinary shares
Bonds
Unamortized bond premium
Land
Buildings
Less: Accumulated depreciation
Fund held by trustee
TOTAL ASSETS
P 50,000
10,000
317,500
P 750,000
900,000
2,500
P 175,000
10,000
1,692,500
125,000
165,000
400,000
P 2,760,000
LIABILITIES AND NET ASSETS
Gains and losses on pooled investments
Net Assets:
Unrestricted
Endowment Fund A
Endowment Fund B
Endowment Fund C
Endowment Fund F
Total
Restricted:
Endowment Fund D
Principal temporarily functioning as Endowment Fund E
Total
TOTAL LIABILITIES AND NET ASSETS
P 10,000
P 1,000,000
750,000
250,000
400,000
P2,400,000
300,000
50,000
2,750,000
P2,760,000
Transactions related to annuity fund of NPO University:
1. Receipt of cash of P125,000 subject to condition that P5,000 per year be paid to the donor during his lifetime, any
balance available for educational and general purposes.
Account Titles
Debit
Credit
Cash
125,000
Annuity net assets
125,000
Accounting For Non Profit organizations – Group 10
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2.
3.
4.
5.
Purchase of securities for P120,000 that includes accrued interest of P2,000.
Account Titles
Investments
Accrued interest
Cash
Collections of income for the year ended June 30, 20B, P9,500.
Account Titles
Cash
Accrued interest
Annuity net assets
Recognition of amount payable to annuitant, P5,000.
Account Titles
Annuity net assets
Due to annuitant
Debit
118,000
2,000
Credit
120,000
Debit
9,500
Credit
2,000
7,500
Debit
5,000
Credit
5,000
Amount becoming available for educational and general purposes according to annuity agreement, P2,500.
Account Titles
Debit
Credit
Annuity net assets
2,500
Due to Unrestricted Current Fund
2,500
NPO University
Annuity Fund
Statement of Financial Position
June 30, 20B
ASSETS
Cash
Investments
TOTAL ASSETS
LIABILITIES AND NET ASSETS
Due to annuitant
Due to unrestricted current fund
Annuity net assets
TOTAL LIABILITIES AND NET ASSETS
P 14,500
118,000
P132,500
P5,000
2,500
125,000
P 50,750
Accounting For Non Profit organizations – Group 10
Page 18 of 39
NPO University
Annuity Fund
Statement of Charges in Equity
For the year ended June 30, 20B
Net assets, beg.
Add: Increase from gift subject to annuity
Increase from income for year
Total
Less: Amount payable to annuitant for year
Amount payable to unrestricted current fund
Net assets, end
P-0P125,000
7,050
P 5,000
2,500
132,500
P132,500
7,500
P 125,000
PLANT FUNDS
Three groups:
1. Resources that are held for plant expansion and replacement
2. Resources that are held for retirement of long-term debt incurred in the acquisition of the plant
3. The specific physical resources comprising the plant.
Three balancing groups of accounts for plant resources:
1. Unexpended plant funds- consist of cash, securities, receivables and other assets that are used for the
acquisition of new plant or replacement of existing plant. The difference between the assets and liabilities.
This balance is commonly divided into (1) the portion to be applied to plant additions and (2) the portion to
be applied to renewals and replacements.
2. Retirement of indebtedness funds- consist of cash, securities, and other assets that are to be used for the
retirement of plant indebtedness. Fund accounts are balanced by a single fund balance reporting total
resources available for retirement of indebtedness.
3. Invested in plant- consist of the individual property items that compose the educational plant. Carries any
long-term indebtedness relating to plant acquisitions. The difference between plant assets and related
liabilities. This balance is commonly divided to show the different sources of plant financing- gifts, current
funds, and endowment funds.
Transactions related to that Unrestricted Plant Funds of NPO University:
1. Receipt of cash gift to be used for plant acquisitions, P100,000.
Cash
Unexpended plant funds balance- plant addition
2. Payment of additions to buildings, P85,000.
Unexpended plant funds balance- plant addition
Cash
3. Issue of bonds to raise funds for construction of buildings, aP1,500,000.
Cash
Unexpended plant funds balance- plant additions
4. Completion of buildings at contract price of 1,500,000.
Unexpended plant funds balance- plant additions
100,000
100,000
85,000
85,000
1,500,000
1,500,000
1,500,000
Accounting For Non Profit organizations – Group 10
Page 19 of 39
5.
6.
7.
8.
Contracts payable
1,500,000
Payment of contract, 1,500,000.
Contracts payable
1,500,000
Cash
1,500,000
Receipt of cash from unrestricted current fund plant renewals and replacements in subsequent periods,
P30,000.
Cash
30,000
Unexpended plant funds balance- renewals and replacements
30,000
Purchase of securities, P30,000.
Investments
30,000
Cash
30,000
Collection of interest on investments, P750.
Cash
750
Unexpended plant funds balance- plant additions
750
Transactions related to that Retirement on Indebtedness Plant Funds of NPO University:
1. Receipt of cash from unrestricted current for payment of mortgage installment due, P25,000.
Cash
25,000
Retirement of indebtedness funds balance
25,000
2. Payment of mortgage installment due, P25,000
Retirement of indebtedness funds balance
25,000
Cash
25,000
3. Receipt of cash gift to be used for payment of installments due on mortgage in 20C-20E, P75,000.
Cash
75,000
Retirement of indebtedness funds balance
75,000
Transactions related to that Investment In Plant Funds of NPO University:
1. Receipt of gift of land, buildings, and equipment for educational and general purposes valued at P4,000,000;
properties are subject to mortgage for P1,000,000.
Land
850,000
Improvements other than buildings
150,000
Buildings
2,500,000
Equipment
500,000
Mortgage payable
1,000,000
Investment in plant- from gifts
3,000,000
2. Addition to buildings financed by gifts reported in unexpected plant funds, P85,000.
Buildings
85,000
Investment in plant- from gifts
85,000
3. Issue of bonds to be used for construction of buildings, P1,500,000
Buildings to be acquired
1,500,000
Bonds payable
1,500,000
4. Completion of buildings financed by bond issue
Buildings
1,500,000
Buildings to be acquired
1,500,000
Accounting For Non Profit organizations – Group 10
Page 20 of 39
5. Payment by retirement of indebtedness funds of current installment due on mortgage, P25,000
Mortgage payable
25,000
Investment in plant- from current funds
6. Acquisition by general current fund of equipment, P15,000
Equipment
15,000
Investment in plant- from current funds
7. Acquisition by endowment fund of a dormitory valued at P300,000
Land
125,000
Buildings
175,000
Investment in plant- from endowments
8. To record depreciation on buildings represented by endowment, P10,000
Investment in plant- endowments
10,000
Accumulated depreciation
9. Retirement of equipment carried at P5,000
Investment in plant- from gifts
5,000
Equipment
Accounting For Non Profit organizations – Group 10
25,000
15,000
300,000
10,000
5,000
Page 21 of 39
NPO University
Plant Funds
Statement of Financial Position
June 30, 20B
ASSETS
Unexpended Plant Funds:
Cash
Investments
Retirement of indebtedness funds:
Cash
Invested in Plant:
Land
Improvements other than Buildings
Buildings
Less: Accum. Depreciation
Equipment
Total
Less: Items carried in Endowment funds
TOTAL ASSETS
P 15,750
30,000
P 45,750
75,000
P975,000
150,000
P4,260,000
10,000
4,250,000
510,000
P5,885,000
290,000
5,595,000
P 5,715,750
LIABILITIES AND NET ASSETS
Unexpended plant funds:
Balance- plant additions
Balance- renewals and replacements
Retirement of indebtedness funds:
Balance
Investment in plant:
Mortgage payable
Bonds payable
Investment in plantFrom gifts
From current funds
TOTAL LIABILITIES AND NET ASSETS
7.
-
P 15,000
30,750
P 45,750
75,000
P 975,000
1,500,000
P2,475,000
P3,080,000
40,000
3,120,000
5,595,000
P5,715,750
Agency
Educational institution acts as an agent or trustee, holding certain assets on behalf of others.
when agency operations are:
simple and limited duration=both asset accounts and accounts expressing the institution’s accountability to
others may be carried in the general or current fund.
involved and continuing=an agency fund may be recognized and special agency books established for the
properties subject to agency control
agency funds may be established for pension and retirement resources, special organization resources,
student deposits, and tax withholding amounts.
Accounting For Non Profit organizations – Group 10
Page 22 of 39
-
accounting for the agency is the same as it would be for a private business.
HOSPITALS
*Functions:
-
Provide for reception, care and medical and surgical treatment of the sick or injured
rooms are provided and foods are supplied
major activities center about inpatients, but frequently render outpatient care and emergency services
carry on special activities such as research and nurses training
operate number of auxiliary enterprises such as pharmacies for outpatients and cafeterias for staff
members and visitors
its operations call for important administrative activities like:
 hospital staffing
 registration of patients
 operation of the physical plant
 food
 laundry and housekeeping management and budgeting
 accounting
 billing and collecting
The major source of hospital support is normally charges that that are made to patients for services.
However, such charges frequently fail to cover the full cost of hospital operations, and significant sums must be
sought from contributions and grants from private, public and charitable sources.
Funds for Hospital
-
Accounting for hospitals are similar to educational institutions that acquires a revenues that must be applied
to specific objectives.
There’s also certain accounting differences that should be pointed out
Hospital generally does not require variety of funds required by the educational institution. Differences of
the two units are found to their operating summaries.
Educational Institution


revenues were compared with expenditures
a “modified accrual basis” was employed and depreciation of the educational plant was generally ignored.
Hospitals





analysis and a summary of operations that comes closer to that of private business is normally warranted
sell specific services
expectation by patients, group purchasers of insurance protection, and insurance companies selling hospital
protection that charges for services will bear a close relationship to the costs of these services.
although contributions may be available suggest that hospital revenues should be set at levels that will
provide for the ultimate replacements of properties
these factors suggest that revenues, be compared with expenses, that a “full accrual basis” be employed,
and that depreciation of hospital properties be recognized in arriving at total operating costs.
Accounting For Non Profit organizations – Group 10
Page 23 of 39
Four Major Fund Groupings of Hospital
A.GENERAL OR CURRENT FUNDS
 summarized the current resources that are to be used in meeting the obligations arising from general
operations
 resources that can be applied without restriction are reported here
 Expenditures for which specific funds have not been provided are financed from these resources.
 This is the same in nature and function as the general or current fund of the educational institution.
*To illustrate the accounting for the general fund transactions affecting the general fund of NPO Hospital and entries
to record these transactions are listed below.
1. Charges for services to patients for year ended December 31,20B,P580000 of which P45000 is still due:
adjustments and allowances of P60000 apply to charges.
Cash
P475000
Accounts Receivable
45000
Free service and adjustment-contractual patients
40000
Free service and adjustment-general patients
16500
Courtesy and miscellaneous allowances
3500
Earnings from routine services-inpatients
P320000
Earnings from routine services-outpatients
50000
Earnings from special services
210000
2. Other hospital revenues, P420000 of which P10000 is still due from temporary fund in reimbursement of research
expenses.
Cash
Due from temporary fund
General contribution, donations, legacies and bequests
Grants from community chests, foundations
Donated services and commodities
Income transfers from temporary funds
Miscellaneous revenues
P410000
10000
P180000
122000
10,000
57,500
50,000
3. Collections of interest and dividends on endowment funds securities, P85000 of which P5000 is due from
endowment fund #1 representing bond premium amortization.
Cash
Due from Endowment Fund #1
Income from investments
P85, 000
P5, 000
80,000
Accounting For Non Profit organizations – Group 10
Page 24 of 39
4.
Expenditures for hospital supplies, P200000 of which P25 has not been paid.
Inventory supplies
Cash
P200, 000
P175, 000
Vouchers payable
25,000
5. Hospital supplies charged put, P170000
Administrative and general
Household and property
Professional care of patients
Dietery
Outpatient and emergency
Other expenses
Inventory of supplies
6. Payment of hospital salaries and wages, P490000
P5000
10000
15000
120000
5000
15000
Administrative and general
Household and property
Professional care of patients
Dietery
Outpatient and emergency
Other expenses
Cash
7. Payment of hospital expenses other than salaries and wages
P85000
45000
220000
60000
30000
50000
P170000
P490000
Administrative and general
P20000
Household and property
10000
Professional care of patients
25000
Dietery
7500
Outpatient and emergency
2500
Other expenses
10000
Cash
P75000
8. Payments of interest on mortgage, P60000 and of installment due on mortgage carried as liability in the plant
funds, P50000.
Interest expense
P60000
General fund balance
Cash
50000
P110000
9. Adjustments required on December 31,20B;




allowance for uncollectible accounts, P2500
accrued salaries and wages, P5000
charges for depreciation on properties carried as assets by plant funds, P85000
to recognize amount to be paid to plant funds equal to depreciation on properties.
Accounting For Non Profit organizations – Group 10
Page 25 of 39
Bad debts
Allowance for doubtful accounts
P2500
Administrative and general
Household and property
Professional care of patients
Dietery
Outpatient and emergency
Other expenses
Cash
P1000
250
1250
750
250
1500
Depreciation
General or current fund balance
P85000
P2500
P5000
P85000
General or current fund balance
P85000
Due to plant funds
P85000
*The transfer of cash to plant funds to finance the ultimate replacement of properties is recorded by a debit to
general fund balance and a credit to cash. In the example, recognition of reimbursement due to plant funds is
reported by a credit to a payable, the payable would be closed when the cash is transferred.
10. To close general operating revenue and expenses accounts at the end of the period.
Earnings from routine services-inpatients
Earnings from routine services-outpatients
Earnings from special services
General or current fund balance
Free service and adjustment-contractual patients
Free service and adjustment-general patients
Courtesy and miscellaneous allowances
Bad debts
Administrative and general
Household and property
Professional care of patients
Dietery
Outpatient and emergency
Other expenses
P320000
50000
210000
P222500
40000
16500
3500
2500
111000
35250
261250
188250
37750
76500
11. To close other revenue and expenses accounts at the end of the period.
General contribution, donations, legacies and bequests
Grants from community chests, foundations
Donated services and commodities
Income transfers from temporary funds
Income from investments
Miscellaneous revenues
Interest expense
Depreciation
General or current fund balance
P180000
122500
10000
57500
80000
50000
P60000
85000
355000
Accounting For Non Profit organizations – Group 10
Page 26 of 39
*In considering the presentation of hospital revenues for statement purposes, the following classifications are used;



gross revenues from patients
deductions from revenues and
revenue sources
*In considering operating expenses, it recognizes the following classifications;






administrative and general
dietery
household and property
professional care of patients
outpatient and emergency
other expenses
B.TEMPORARY FUNDS
 Composed of current resources that, while available for current purposes, are subject to certain limitations
in their use
 For example, resources from gifts on grants and income from endowment funds that can be spent only for
specified purposes, such as research, a medical library, or nurses training, would be reported as temporary
funds
 Temporary funds are identical in nature and functions to the restricted current funds of the educational
institution.
 Temporary fund transactions of NPO Hospital and the entries to summarize these are listed below:
1. Receipt of cash gift to be used for medical research, P10000
Cash
Temporary fund A balance
2. Purchase of securities, P85000
P100000
P100000
Temporary investment -fund A
P85000
Cash
3. Receipts of cash gifts to be used for books and journals for hospital patients, P10000
P85000
Cash
Temporary fund balance
4. Sale of securities, book value, P25000, for P23500
P10000
P10000
Cash
Temporary fund A balance
Temporary investment -fund A
5. Collections of interest and dividends
P23500
1500
P25000
Cash
P5000
Temporary fund A balance
P5000
6. Expenditures during year by general fund for research chargeable to temporary fund A, P50000; cash transferred
to general fund, P40000.
Accounting For Non Profit organizations – Group 10
Page 27 of 39
Temporary investment -fund A
P50000
Cash
P40000
Due to general fund
10000
7. Payment of general fund for books and journals chargeable to temporary fund B balance, P7500.
Temporary fund A balance
P7500
Cash
8. Adjustments required on December 31,20B; accrued interest on securities, P250
Accrued interest in temporary fund
Temporary fund A balance
P7500
P250
P250
In the example, the temporary fund books summarize two temporary fund, and a separate fund balances are
maintained to report the respective fund equities. It should be observed that changes in temporary fund balances
arising from revenues, expenses and distributions are recorded directly in the fund balances; when there are many
changes and these are to be reported in special operating statements, nominal accounts would be established to
accumulate profit and loss derail.
C.ENDOWMENT FUNDS






represent resources that have been transferred under conditions that limit expenditures to the income that
is produced by such resources.
Assets may be transferred directly to the hospital, or they may be transferred to a trustee who administers
them for the benefit of the institution
May also be created by the action of the governing board of the hospital.
Terms of it may place no restrictions on the use of the endowment income, or they may specify a particular
purpose for which the income is to be used.
In the absence of restrictions, its income becomes available to the general fund; when there are restrictions;
income is in a temporary fund.
Endowment fund transactions of NPO Hospital and the entries to summarize these are listed below.
1. Receipt of bonds in establishment of Endowment fund #1 as follows: Co.S bonds Face value, P500000, market
value on date of transfer, P470000.
Investments in bonds at fair value(Endowment fund #1)
Investments-unamortized bond premium(Endowment fund #1)
Investments-unamortized bond discount (Endowment fund #1)
Endowment fund #1 balance
P1000000
50000
P30000
1020000
2. Receipt of cash in establishment of Endowment fund # 2, P250000.Endowment income is to be used for specified
research projects.
Cash
Endowment fund #1 balance
3. Purchase of 1000 shares of Co.T preference shares, P240000.
P250000
Investment in preference shares(Endowment fund #2)
Cash
P240000
P250000
P240000
Accounting For Non Profit organizations – Group 10
Page 28 of 39
4. Collection of interest by general or current fund that includes P5000 reimbursable to Endowment fund #1 for bond
premium amortization.
Due from general or current fund
Investments-unamortized bond premium(Endowment fund #1)
5. Sale of Co.S bonds at fair value, P250000
Cash
Investments-unamortized bond discount (Endowment fund #1)
Investments-at bonds at fair value(Endowment fund #1)
Endowment fund #1 balance
P5000
P5000
P250000
15000
P250000
15000
In the example, Endowment fund books summarize to endowment and separate endowment fund balances
summarize their respective fund equities. It should be observed in the example that endowment fund income is
reported directly in the fund that in entitled to such income. When revenue and expense are involved in a
determination of net income, revenue and expense can be summarized in the Endowment funds books; the fund net
income, when determined is then transferred to the appropriate fund.
D.PLANT FUNDS
Two Groups of Plant Resources
1.
2.
Physical resources comprising the hospital properties
Cash and other assets that is available for the improvement and the replacement of the hospital properties.
Although the two asset of groups are recognized, hospitals would nevertheless combined these within a single plant
funds category
When there are claims against plant fund resources in connection with original financing of properties, construction
in progress, or current property acquisitions, such obligations would be recognized in the plant funds.
Funds are balanced by two plant fund balances:
1. Investment in plant
2. Reserve for plant improvement and expansion
Transactions affecting the plant funds of NPO Hospital and the entries to record these transactions are shown below:
1. Acquisition of land construction of hospital financed by gifts of cash, P1500000 and cash raised through a
mortgage, P1000000.
Land
Building
Equipment
Mortgage Payable
Investment in Plant
P250000
1750000
500000
1000000
1500000
Accounting For Non Profit organizations – Group 10
Page 29 of 39
2. Receipt of gifts of cash of P50000 and securities valued at P100000 for plant improvement and replacements
Cash
Investments
Reserve for plant improvement and replacements
3. Acquisition of equipment, P30000 mortgage, P1000000.
P50000
100000
Reserve for plant improvement and replacements
Cash
P30000
Equipment
Investment in Plant
4. Payment by general fund of mortgage installment, P50000.
P30000
P150000
P30000
P30000
Mortgage Payable
P50000
Investment in Plant
5. Adjustments required on December 31,20B:
a) accrued investments on investment,P1500;
b) depreciation for plant assets for year,P85000;
c) amount recoverable from general fund equal to depreciation on plant assets.
Accrued interest on investments
P1500
Reserve for plant improvements and replacements
Investment in plant
Accumulated Depreciation-building
Accumulated Depreciation-equipment
P85000
Due from general fund
Reserve for plant improvements and replacements
P85000
P50000
P1500
P35000
50000
P85000
Alternative approaches have been suggested for analyzing and recording plant funds transactions of the hospital.
Probably the best approach would recognize two self-balancing sets of accounts, one summarizing the existing
physical plant and the other summarizing resources that are held for plant improvement and replacement.
With such an approach, the analysis of transactions affecting hospital plant assets, liabilities, and fund balances or
net assets is the same as that employed for the educational unit. However, the entries relating to existing plant and
to improvement and replacement resources are made in self-balancing from within a single set of books instead of in
separate sets of books as in the case of the educational unit.
COOPERATIVES
A cooperative is a business organization owned and operated by a group of individuals for their mutual
benefit. Cooperatives are defined by the International Co-operative Alliance's Statement on the Co-operative Identity
as autonomous associations of persons united voluntarily to meet their common economic, social, and cultural needs
and aspirations through jointly owned and democratically controlled enterprises. A cooperative may also be defined
Accounting For Non Profit organizations – Group 10
Page 30 of 39
as a business owned and controlled equally by the people who use its services or by the people who work there.
Cooperative enterprises are the focus of study in the field of cooperative
A credit cooperative is financial organization owned and operated by its member with the following objectives:



to encourage saving among its members
to create pool of such savings from which loan for productive purpose may be granted to its member
to provide related services to its members to maximize the benefit from such loan.
Current accounting policies and procedures adopted by credit cooperatives were used as basis in
development of this manual. Key officers of cooperatives were interviewed and financial statements and relevant
reference materials were gathered from organizations during capacity building for cooperatives.
As a general rule, a good accounting system includes the following:
1.
2.
3.
4.
5.
6.
A well-conceived chart of accounts and general ledger system.
Clearly laid out procedures for keeping accounting records accurate and up to date.
Skilled personnel whose primary responsibility is to track, update and report financial information
A sound system for monitoring loan disbursements, collection and
Deposit transaction.
Appropriate accounting safeguard and control to provide reasonable assurance that accounting books are
complete and accurate.
CONCEPTS AND GENERAL PRINCIPLE
1. Separate Enterprise
Each cooperative is a separate business enterprise requiring the maintenance of comprehensive accounting
records and financial reporting practices to provide meaningful information to members, officers, directors and audit
committee of cooperative, government agencies, the apex organization and other interested third parties.
2. "Going Concern" Concept
Each credit cooperative should normally maintain its account s as "going concern: on the basis that its
operation will continue definitely. Therefore , Assets and liabilities should be presented in the financial statement at
historical cost and not as liquidation value.
3. Monetary Basis of Accounting
Financial Statements in the Philippines are expressed in terms of Philippine Peso (Php), hence, accounts of
credit cooperative should be stated in peso amounts involve at the time the transaction occur
4. Consistency in Accounting Practice From Period to Period.
Consistent accounting practices should be followed by each cooperative from one accounting period to the
next.
5. Timely Recognition in Accounting Records
Accounting record should be recorded on a timely basis so that all material information applicable to each
accounting period will be shown in the record. To properly recognize in accounting record and financial reports the
reasonable value of assets, liabilities, equity revenues and expenses, each credit cooperative should make provision
for losses that may be sustained I the collection or conversion of loans and other assets by charge against current
operation.
6. Materiality
Material fact relating to the credit cooperative's activity must be recognize in the accounts of said
cooperative and reports in its financial statements. A statement, fact or item is material if, fiving full consideration to
the surrounding circumstances as they exist at the time, it is of such a nature that its disclosure would likely influence
or "make a difference" in the judgment and conduct of a reasonable person.
7. Principle of Disclosure
Accounting For Non Profit organizations – Group 10
Page 31 of 39
This accounting principle requires that the members of the cooperative and other users of the financial
statements should be informed of material and relevant information about economic and financial affair of the
cooperative. This can be done either in the financial statements or in the notes that company the statements of
supplementary schedules and other presentation. Full disclosure requires reporting of all facts that can make a
difference in the decision of the users and that the accounting information reported must be understandable and not
susceptible to misinterpretation. Such disclosure makes the financial statements more relevant and useful and less
subject to misinterpretation.
Adequate information to be disclosed in the financial statements may not be presented in detail provided
that important and relevant facts are revealed and made clear. The full-disclosure principle requires the financial
report to give more emphasis to substance over form. This means that the substance should not be made less clear
or hidden.
There are, however, limits to the amount of disclosure that can be made in financial statements or in
accompanying notes. As minimum information, the following should generally be disclosed.
a.
b.
c.
d.
e.
f.
g.
h.
Accounting method used I preparing financial statements
Changes in the use of accounting method during current period
Term of major borrowing arrangements
Existence of large contingent liabilities
Major proposed asset acquisition
Contractual provision relating to leasing arrangements and employee pension and bonus
plan
Significant events affecting financial position, including major contracts for sale of services and
pending legislation which mat affect significantly the operations of the cooperative
i. Other materials and significant events which will occur after the end of accounting period and
before the financial statements are released and which are relevant to users.
8. Principle of Conservatism
Each credit cooperative should maintain its accounting records on a conservative basis. It should make
reasonable provision in the accounts for probable losses on assets and for the settlement of liabilities. It should not
materially overstate nor understate its asset, liabilities, revenues or expenses.
9. Accounting Basis
Modified Cash Basis is the prescribed accounting basis for a cooperative. This is a combination of cash basis
of accounting and accrual basis of accounting. Under the modified cash basis, the accounting is based on actual
receipt s and disbursements of the credit cooperative except that provision should be made to reflect:
a. Liabilities which are not paid when due;
b. Unpaid interest on share capital and patronage refund applicable to the accounting period;
c. Deferred credits and charges that are applicable to future periods;
d. Estimated losses on loans outstanding and other risk assets; and
e. The depreciation of property and equipment
Other two accounting bases are;
a. Cash Basis - Revenue is recorded and accounted for when actually collected and expenses are accounted for when
actually paid.
b. Accrual Basis - It provides the most complete and informative record of the financial activities of the cooperative.
Under accrual basis of accounting, the credit cooperatives record revenue when earned and expenses and liabilities
as incurred regardless of the timing of the actual receipt or payment.
10. Accounting Safeguard and Control
Each credit cooperative should adopt appropriate accounting safeguard and control to provide its members
and the general public reasonable assurance that accounting records are complete and accurate.
11. Accounting period
Accounting For Non Profit organizations – Group 10
Page 32 of 39
The accounting period shall be 12-month period starting January 1 and ending December 31, as common
practiced.
FINANCIAL STATEMENTS
Financial statements are the means by which the information accumulated and processed in financial
accounting is periodically communicated to those who use it. They are designed to serve the needs of a variety of
users, particularly owners and creditors. Trough the financial accounting process, the myriad and complex effect of
the economic activities of a cooperative are accumulated, analyzed, quantified, recorded, summarized and reported
as information of two basic types;
a. financial condition, which relates to a point in time
b. financial operations, which relates to a period of time
Notes to financial statement, which may explain headings, captions or amounts in the statements or present
information that cannot be expressed in terms of money and those descriptions of accounting policies are integral
part of the statements.
A. Statement of Financial Condition (Balance Sheet)
The statement of financial condition presents the difference between the total assets and total liabilities. The
statement at any date present s an indication in conformity with generally accepted accounting principles of the
financial status on the cooperative at a particular point of time.
B. Statement of Operation (Statement of Net Surplus)
Presents the revenues, expenses, gain, losses and net surplus (net loss) recognized during the period and thereby
presents an indication in conformity with GAAP of the result of the cooperative's service directed activities during the
period. The information presented in the statement of operation is usually considered as the most important
information provided by financial accounting because the net surplus is paramount concern to those interested in
economic activities of cooperative.
C. Statement of Cash Flow is a formal statement summarizing all operating, investing and financiang activities of a
cooperative.
D. Other Schedules such as:
a. Bank Reconciliation
b. Aging of Loans receivables
d. Property and equipment
e. Members loans receivable, saving/time deposit, subscribed and paid-up share capital.
f. Investment
g. Accounts Payable
h. Loans Payable
i. Use of:
i. Reserve refund
ii Optional refund
iii Education and training Fund
Apex
Local
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Attachments:
Comparable Financial Statements of Baguio- Benguet Community Credit Cooperative for
the year ended 2008- 2009
1. Statements of Financial position
2. Statement of Changes in Equity
3. Statement of Financial Operations
4. Statements of Cash Flows
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Reference:
 Accounting for Government and Non-Profit organizations by Josephine Antonio –
Ocampo, CPA, MPA 2010 Edition
 Theory of Accounts by Conrado Valix, 2009 edition
 BBCCC Financial Statements published magazine courtesy of BBCCC.
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