Nonprofit Accounting

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“Nonprofit Accounting Frequently Asked Questions by expert members with experience in Nonprofit Accounting. These questions and answers will help you strengthen your technical skills, prepare for the new job test and quickly revise the concepts”



61 Nonprofit Accounting Questions And Answers

1⟩ What is VC money in financials?

It depends on the form in which the money comes in. If it was invested as equity (either Common or Preferred Stock), it shows up on the balance sheet as Paid in Capital. If it came in as debt (such as bridge loan, secured note, etc.) it shows up as debt that must be repaid by the company.

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2⟩ Define offset accounting?

The one reduces the gross amount of another account to derive a net balance. Accumulated depreciation, which is a contra account to fixed assets to obtain book value, is an example of an offset account.

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3⟩ How accounting contribute to the community?

Accounting helps communities in many ways. Accountants help the communities manage their money and they take care of their taxes yearly. They also manage their money, help set a budget for them and teach them to manage their money wisely.

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4⟩ Explain the difference between bookkeeping and accounting?

Bookkeepers are responsible for maintaining the "business checkbook", much like a personal checkbook. They record routine money transactions like customer payments into a "cash receipts journal" and checks to vendors into a "cash disbursement journal." They also process payroll. At month end they transfer or "post", the "journal" totals to the "general ledger" in preparation for financial statements prepared by the accountant.

Accountants are responsible for the design and management of the financial systems that bookkeepers use. They prepare monthly financial statements and tax returns at year-end. Accountants may also prepare budgets for management and loan proposals for bankers; and perform cost analysis for the company's products or services.

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6⟩ Explain the difference between public and private accounting?

Public accounting includes any accounting work that a company performs for another company. Examples would be audits, tax compliance, consulting, etc. The "Big 4" (KPMG, Deloitte & Touché, Price Waterhouse Coopers, and Ernst & Young) are the dominant firms that provide public accounting services.

Private accounting is accounting work that is done for your own company. Every company has some form of an internal accounting department and those employees would be considered private accountants.

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7⟩ What is responsibility accounting?

They are Collection, summarization, and reporting of financial information about various decision centers (responsibility centers) throughout an organization; called activity accounting or profitability accounting. It traces costs, revenues, or profits to the individual managers who are primarily responsible for making decisions about the costs, revenues, or profits in question and taking action about them. Responsibility accounting is appropriate where top management has delegated authority to make decisions. The idea behind responsibility accounting is that each manager's performance should be judged by how well he or she manages those items under his or her control.

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9⟩ Define the word credit mean in terms of accounting?

The word "credit" is part of the equation of double entry bookkeeping.

In order for bookkeeping entries to balance, there must always be a debit (left side, abbreviated by "dr") and credit (right side, abbreviated by "cr") entry that equal one another.

For example, to record an Office Supply Store purchase (on account ~ a payable), the entry would be:

Office Supplies Exp $500.00(dr)

Accounts Payable $500.00(cr)

If an entry does not balance the totals for debits and credits, your books will be out of balance.

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14⟩ Described the disadvantages of back-flush accounting?

One of the main disadvantages of the system is that it only works under some quite strict requirements. If these are not met, the system will become unbalanced and may be quite unusable, or a nightmare to maintain.

Standard costs must be reliably estimated and variances kept to a minimum. The premise of the system is that a sale triggers the manufacturing process, therefore buildup of work in progress or finished goods needs to be avoided Another drawback is that detailed information for management purposes may not be available where needed, and the production control therefore needs to be all the stronger. The cost accounts used in back-flush accounting may be more difficult to reconcile to financial accounts needed for reporting.

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16⟩ What is Tell me consistency concept in accounting?

Consistency is a concept used when applying accounting methods to a business, the business must continue to use that particular method. For an example if a company is charging depreciation using the straight-line method, they must stick with the straight-line method.

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17⟩ What is social responsibility accounting?

It is a new phase to development of accounting and its birth to increase the social awareness. In addition, it is the social effects of business decisions in addition to the economic effects.

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19⟩ Explain bills receivable?

Bills Receivable , in merchant accounts, are all promissory notes, bills of exchange, bonds, and other evidences or securities which a merchant or trader holds, and which are payable to him.

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20⟩ Explain deferred account?

A best example of a deferred account is advertisement expense account. This account are those where an investment or expense is don't with an expectation of making a intangible profit which cannot be measured or directly linked to expense.

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