Course 303: Financial Accounting and Reporting for Nonprofit
Organizations
Lesson 1 Exercise 2
Readings and Presentation Study Guide
NAME:
The purpose of this course is NOT to make you into accountants. It is to introduce you to
accounting language, principles and ideas so that you can understand financial information
and use it to make good decisions.
As mentioned in the syllabus, we will be using 990s in this class to learn these principles.
We will do this, no matter what country you are located in, because U.S. IRS forms 990 are:
 Standard – Everyone is looking at exactly the same thing.
 Accessible – They HAVE to be filed by all but the smallest nonprofit
organizations, and those that are classified as churches.
 Comprehensive – If you learn to read 990s, you can read audited financial
statements – in the U.S., or Canada, or around the world.
Since this information will be totally new to many of you, we will be using a combination of
audio tapes and Power Point presentations – and later on, spreadsheets – to teach you the
information, in addition to our basic textbook, Thomas McLaughlin’s Streetsmart Financial
Basics for Nonprofit Managers, Third Edition. You will demonstrate your comprehension by
filling out and submitting weekly study guides, an assignment that applies what you have
learned, and a posting to the class listserve that shares what you have learned.
After reading McLaughlin, listening to the audio and going through the Power Point
presentation, Introduction to Accounting, please complete and submit this study guide.
1.
Why is accounting important? What is the statement about accounting that
accountants typically make about it? Write one or two sentences.
2.
What is the biggest mistake accountants and nonprofit leaders make when they deal
with financial information? Why is this such a serious mistake? Write two to three
sentences.
3.
McLaughlin talks about nonprofits’ two bottom lines. List what those are and
describe them in one or two sentences each.
4.
Define the term “fiscal year.” Tell why this is important to an organization, and how
they should determine it. Write two or three sentences.
5.
What is your organization’s fiscal year? Why does or doesn’t this make sense,
given what you know about your organization. Write three or four sentences.
6.
Define “net income” and “gross income.” What is the difference between the two?
Which one determines if your organization has a profit or a loss? Write two to three
sentences.
Define “debit” and “credit”?
7.
Which is better? Write two sentences about this.
8.
Define the “money measurement” principle.
information. Write two to three sentences.
Why is this a limitation of financial
9.
Name three things of value associated with your organization that you cannot
measure with money, yet are so valuable that you would have to shut down if you did not
have them.
1.
2.
3.
9.
Define “in kind” donations and why they are important to a nonprofit.
10.
List three types of in kind donations received by your organization.
1.
2.
3.
11.
Define “conservatism.” Why do accountants follow this principle in their reporting?
Write two to three sentences.
12.
What are the three basic functions (“legs”) of nonprofit organizations? List them, and
write a sentence about each telling why they are important.
1.
2.
3.
13.
Define “cost concept” and describe how it is used in accounting.
accountants do this? Write three or four sentences.
Why do
14.
Define “realization.” Does this concern income or expenses? Why do accountants
do this? What does this mean in relationship to an organization’s cash? Write three or
four sentences.
15.
Define “matching.”
sentences.
Does this concern income or expenses? Write two or three
16.
Define “materiality.” How do auditors use this concept when they are checking
financial information? Write two or three sentences.
17.
Define “entity.” What must accountants do concerning their entity, and what must
they not do? Write two or three sentences.
18.
What do auditors mean when they say they have a “going concern” issue with an
organization? Why is this important for people to know? Write two or three sentences.