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Individual Assignment: Accounting Short-Answer Questions
Resource: Financial Management for Human Service Administrators Write 200- to 300-word responses to the following questions:
What are the major accounting differences between nonprofit and for-profit organizations? Why are audits becoming increasingly important in the nonprofit sector? Cite at least three reasons.
Complete Exercises 4.1–4.3 in Ch. 4 of Financial Management for Human Service Administrator
What are the major accounting differences between nonprofit and for-profit organizations?
July 1, 20XX–December 31, 20XX (a).July 1, 20XX— Received unrestricted donation check in the amount of $15,000 from the Multnomah County Department of Health and Human Services. Debited Cash Credited Revenue $15,000 $15,000
(b) July 19, 20XX—Paid Great Northwest Insurance Company $9,000 for six more months of fire and liability insurance coverage. Debited Prepaid Insurance $ 9,000 Credited Cash $ 9,000
(c) July 15, 20XX—Paid Portland Arts & Crafts Company $3,000 for additional arts and crafts supplies. Debited Arts & Crafts Supplies $ 3,000
but not yet collected.500 Credited Cash $7.500 (k) December 31.000 (I) December 31.000 .000 $40.000 in parent fees earned in the second six months of operations.500 (j) December 31.000 Credited Cash $5. 20XX—transferred temporarily restricted funds in the amount of $3.000.000 (e) July 30. Debited Expense $55. 20XX—Paid salaries and employee-related expenses in the amount of $55. 20XX—To account for $1.500 Credited Accounts Payable $ 1.Credited Cash $ 3. Debited Expense $7.000 Credited Cash $3. 20XX—Paid Oregon Sporting Goods $5. Debited Expense $ 1. but collected in the second six months.000 Credited Revenue $3.500 for utilities. Debited Expense $ 5.000 for additional recreational equipment.000 Credited Cash $55.500 incurred during the first six months of operations. but paid in the second six months. Debited Accounts Receivable $ 3. Debited Cash Credited Revenue $40. Debited Investments $3.750 (h) December 31.000 from investments to pay for additional arts and crafts supplies.000 (g) December 31.000 (d) July 15. 20XX—Received fees from parents in the amount of $40.000.750 Credited Accounts Payable $ 1.750 in fees from parents earned in the first six months of operations. 20XX—Paid Portland Gas & Electric Company $7. 20XX—To account for expenses (John’s Deli) in the amount of $1. Debited Expense $ 1. 20XX—To account for $3.000 (f) December 31.
20XX—To expense prepaid insurance in the amount of $9.000 $5.000 $ 3. 20XX—Paid Pacific Bell Telephone Company $750 for telephone services.000 $7.000 Credited Prepaid Insurance $ 9.000 .000 $3.000.000 Credited Arts and Crafts Supplies $ 2.000 $ 9. Debited Expense $ 9.000 Prepaid Insurance $ 9.250 $15.000.000 Arts and Crafts Supplies $ 500 $ 5.000 Cash Debit Credit $ 9.250 -$58.000 $42.000 $5.000 $4.000 (n) December 31. Debited Expense $ 2. Debited Expense $750 Credited Cash $750 (m) December 31.(l) December 31.500 $ 2.000 $58.500 $7.500 $100.000 $ 3.000 $ 3.500 $750 $64. 20XX—To expense arts and crafts supplies in the amount of $2.000 $40.
500 $7.750 $ 1.750 Expense $0 $5.500 $4.500 $ 1.000 $58.750 $ 1.000 Net Assets $75.000 $3.000 $750 .000 Accounts Payable $ 1.750 $ 3.Accounts Receivable $ 1.250 Investments $10.000 Revenue $0 $15.000 $13.000 $ 1.500 $55.250 $3.000 $40.000 $3.000 $ 1.
000 4. When a company pays the bills.500 1. Accrual basis of accounting is recognizing revenue when it is earned and recognizing expenses when it is incurred notwithstanding before the expense is paid.750 82.500 $62.000 13.000 $ 2.500 Cash Arts and crafts supplies Accounts receivable Revenue Investments Accounts payable Expenses $ 42.000 $82.500 $143.752 What are the major accounting differences between nonprofit and for-profit organizations? The main accounting differences between nonprofit and for-profit organization is that the procedure of accounting of nonprofit organizations is on cash basis only is accepted and for-profit companies’ accrual basis is generally applied. For financial reporting in accordance .250 4. The accrual basis of accounting reflects an accurate financial state than that of a cash basis. the bills are already recorded as liabilities and money that is collected or still to be collected are recorded as an asset already.$ 9.250 $58.
The amounts of transactions of for-profit companies are more numerous. interest income and expenses. many of them continue to be funded from one year to another with no systematic audit of the transactions that were executed.with generally accepted accounting principles. As for profit companies are seemly more aware of the requisites to prepare and manage budgets as control techniques. There are typically receipts journal. such as inventory management. Hence. In fact. the civil servants are not many or qualified adequately to analyze cautiously the records handed over by the nonprofit . costs of sales. there are as well transactions relevant to revenue. HR. 2000). profit companies are as well concerned if the funds are properly managed. including donating cash to nonprofit organizations. A cash-basis company may be demanding for the reason that payment of expenses may delay for a long period after incurring the liabilities (2010). Additionally to cash receipts and disbursements transactions. and petty cash (Martin. It is very complicated for a company to for practical purposes to manage a budget not recording on an accrual basis. In the computerized and incorporated setting. payrolls. Nonprofit organization uses cash basis since it is less complex and takes not as much of time to adjust. disbursements or expenditures journal. the control executed is deficient in capability: the nonprofit organizations are not for all time funded for a particular objective on an factual basis. the accrual basis of accounting must be used and as required by law. The accountants record the journals of historical financial transactions. Non-profit organizations the fundamental to their transactions is cash receipts. the accounting function is connected to the company’s operations. and cost control. Different nonprofit organizations are funded by the governments and utilized the governments’ subsidy to fund their activities. fixed assets. Why are audits becoming increasingly important in the nonprofit sector? Different companies keep in mind on the corporate duty by giving back to the community.
com/advantages-of-the-accrual-basis-of-accounting. The accessibility of audit reports will add to the people confidence in the nonprofit organizations. Retrieved from http://ecowarde.pdf Martin. (2001).organizations and the various ministries do not exchange a sufficient amount of their proficiency. .html The Hauser Center for Nonprofit Organizations and (2000). The audits are turning into an interest since the accurateness of the data particularized on the federal reporting forms for the nonprofit organizations for the reason that the inconsistencies of various categories and for the reason that audits of nonprofit organizations has become a rising infrequency (2000). Strategic Positioning and the Financing of. will facilitate to recognize the weaknesses in the organizations’ internal controls and recommend matter for amends. References (2010) Advantages of the Accrual Basis of Accounting. Needham Heights. MA: Allyn and Bacon. L.hks.edu/hauser/PDF_XLS/workingpapers/workingpaper_2. Financial management for human service administrators. Retrieved from http://www.harvard. On the other hand by conducting audits. L.
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