Nonprofit (Not-for-Profit) Accounting

We are now ready to present examples of the statement of financial position and the statement of activities. To do that, we'll follow the activities of a nonprofit organization called Home4U, a daytime shelter for adults.

Let's assume that Home4U was incorporated in January 2012 and its accounting years will end on each December 31. The following transactions occurred during a three-month period.

January Transaction

Transaction 1. On January 31, a donor contributes $10,000, without restriction, for the operation of Home4U. This transaction affects the general ledger accounts as follows:

Date

Account Name

Debit

Credit

Jan. 31

Checking account - general

10,000

Revenues: contributions - general

10,000

Assuming this is the only transaction in January, the general ledger account balances will result in the following financial statements:

Home4U Statement of Financial Position January 31, 2012 Assets Liabilities & Net Assets Cash & cash equivalents $10,000 Liabilities $        0 Net assets Unrestricted net assets 10,000 Total assets $10,000 Total liabilities & net assets $10,000

Home4U
Statement of Activities
For the Month Ended January 31, 2012

Unrestricted Temporarily Restricted Permanently Restricted Total Revenues     Contributions $10,000 – – $10,000 Expenses     Program expenses     Gen & admin expenses     Fundraising expenses – – – – – – – – – – – – Change in net assets 10,000 – – 10,000 + Net assets-beginning – – – – = Net assets-ending* $10,000 $         – $         – $10,000

* Note that the unrestricted net assets at January 31 must agree with the amount reported on the
  Statement of Financial Position as of January 31.

February Transactions

Transaction 2. On February 1, Home4U rents office space. A check is written for $2,000. This covers a one-time security deposit of $1,000 plus the February office rent of $1,000.

Date

Account Name

Debit

Credit

Feb. 1

Security deposits

1,000

Rent expense

1,000

Checking account - general

2,000

Transaction 3. On February 2, a $400 check is written to the utility as a one-time security deposit for electricity and heat service.

Date

Account Name

Debit

Credit

Feb. 2

Security deposits

400

Checking account - general

400

Transaction 4. On February 19, Home4U receives a contribution of $8,000 that the donor specifies must be used for the purchase of furniture. The contribution is deposited into a money market account. This transaction affects the general ledger accounts as follows:

Date

Account Name

Debit

Credit

Feb. 19

Money market account - temp restricted

8,000

Revenues: contributions - temp restricted

8,000

Transaction 5. The electricity and heating invoice has not arrived. It is estimated that the amount for February's usage was $350, so the following accrual adjusting entry is recorded on February 28:

Date

Account Name

Debit

Credit

Feb. 28

Electricity, heat and water expense

350

Accrued expenses

350

Assuming that Transactions 2 through 5 are the only transactions occurring in February, the general ledger account balances will result in the following financial statements:

Home4U Statement of Financial Position February 28, 2012 Assets Liabilities & Net Assets Cash & cash equivalents $15,600 Accrued expenses $     350 Security deposits 1,400 Net assets Unrestricted net assets 8,650 Temp restricted net assets     8,000 Total net assets 16,650 Total assets $17,000 Total liabilities & net assets $17,000

Home4U
Statement of Activities
For the One Month Ended February 28, 2012

Unrestricted Temporarily Restricted Permanently Restricted Total Revenues     Contributions $         –  $8,000 – $  8,000 Expenses     Program expenses     Gen & admin expenses     Fundraising expenses –  1,350  –  – – – – – – – 1,350 – Change in net assets ( 1,350) 8,000 – 6,650 + Net assets-beginning 10,000  – – 10,000 = Net assets-ending** $  8,650  $8,000 $         – $16,650

Home4U
Statement of Activities
For the Two Months Ended February 28, 2012

Unrestricted Temporarily Restricted Permanently Restricted Total Revenues     Contributions $10,000 $8,000 – $18,000 Expenses     Program expenses     Gen & admin expenses     Fundraising expenses – 1,350 – – – – – – – – 1,350 – Change in net assets 8,650 8,000 – 16,650 + Net assets-beginning – – – – = Net assets-ending** $  8,650 $8,000 $         – $16,650

** Note that the ending net asset amounts must agree with the net asset amounts reported on the
   Statement of Financial Position dated February 28, 2012:

Unrestricted net assets-ending	$  8,650
Temporarily restricted net assets-ending	8,000
Total net assets-ending	$16,650

March Transactions

During March, Home4U paid the March rent of $1,000. Home4U also paid the February utilities which were equal to the estimated amount of $350. Home4U estimates that March's utilities will be $300.

On March 31, Home4U paid $8,300 to purchase furniture (using the restricted donation of $8,000). The statement of financial position dated March 31 will report the following amounts:

Home4U Statement of Financial Position March 31, 2012 Assets Liabilities & Net Assets Cash & cash equivalents $  5,950 Accrued expenses $     300 Security deposits 1,400 Net assets Furniture 8,300 Unrestricted net assets   15,350 Total net assets 15,350 Total assets $15,650 Total liabilities & net assets $15,650

Home4U
Statement of Activities
For the Month Ended March 31, 2012

Unrestricted Temporarily Restricted Permanently Restricted Total Revenues     Contributions     Net assets released     from restrictions        Total revenues $        –    8,000    8,000 $         –    ( 8,000)   ( 8,000) $         –           –           – $         –            –            –  Expenses     Program expenses     Gen & admin expenses     Fundraising expenses        Total expenses – 1,300          –    1,300 –  –            –            –  – –           –           – –  1,300           –     1,300  Change in net assets 6,700 ( 8,000) – ( 1,300) + Net assets-beginning 8,650 8,000  – 16,650  = Net assets-ending $15,350 $         –  $         – $15,350

Home4U
Statement of Activities
For the Three Months Ended March 31, 2012

Unrestricted Temporarily Restricted Permanently Restricted Total Revenues     Contributions     Net assets released     from restrictions        Total revenues $10,000     8,000   18,000 $   8,000    ( 8,000)           –  $         –           –           – $18,000           – $18,000 Expenses     Program expenses     Gen & admin expenses     Fundraising expenses        Total expenses – 2,650           –     2,650 –  –            –            –  – –           –           – – 2,650          –    2,650 Change in net assets 15,350 –  – 15,350 + Net assets-beginning – –  – – = Net assets-ending $15,350 $         –  $         – $15,350

Again, the ending net asset amounts must agree with the net asset amounts reported on the
Statement of Financial Position dated March 31, 2012:

Unrestricted net assets-ending	$15,350
Temporarily restricted net assets-ending	–
Total net assets-ending	$15,350

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