Question 1

Voluntary health and welfare organizations promote the general health and well-being of the public.

Accepted Answer

Voluntary health and welfare organizations are non-profit groups that work towards promoting the health and well-being of the public through education, research, and direct services. Examples of such organizations include American Heart Association, American Cancer Society, and World Health Organization.

Question 2

FASB statement 116 requires unconditional pledges of support to be recorded as revenue when the contribution is promised.

Accepted Answer

FASB statement 116 requires unconditional pledges of support to be recorded as revenue when the contribution is promised.

Question 3

Donated services should be considered revenue if the service creates or enhances a nonfinancial asset and requires a specialized skill which would have had to be purchased if not donated.

Accepted Answer

According to Generally Accepted Accounting Principles (GAAP), donated services that meet the criteria of creating or enhancing a nonfinancial asset and requiring a specialized skill should be considered revenue and recorded at their fair value in the financial statements.

Question 4

Cash flows must be presented separately in the Statement of Cash Flows for the three classes (unrestricted,temporarily restricted,and permanently restricted).

Accepted Answer

The Statement of Cash Flows uses the standard FASB categories; operating, investing and financing. Restricted contributions or restricted investment proceeds that will be used for long-term purposes such as endowments or plant, are reported as financing activities.

Question 5

Expenses must be presented separately in the Statement of Activities for the three classes (unrestricted,temporarily restricted,and permanently restricted).

Accepted Answer

The requirement to present expenses separately by class was eliminated with the update to the accounting standards (ASU 2016-14) for not-for-profit entities, which now requires expenses to be reported by their natural and functional classifications instead.

Question 6

Donated fixed assets that have not yet been depreciated may be recorded as either unrestricted or temporarily restricted.

Accepted Answer

Donated fixed assets that have not yet been depreciated may be recorded as either unrestricted or temporarily restricted, depending on any restrictions or conditions placed on the donation by the donor. If there are no restrictions, the asset may be recorded as unrestricted. If there are restrictions, the asset may be recorded as temporarily restricted until the conditions are met or the restrictions are lifted.

Question 7

FASB statement 116 requires contributions to be recorded as revenue when the contribution is likely to be received.

Accepted Answer

The answer of FASB statement 116 requires contributions to be...

Question 8

A Statement of Functional Expenses is required for voluntary health and welfare organizations.

Accepted Answer

According to the Financial Accounting Standards Board (FASB) guidelines, a Statement of Functional Expenses is required for all voluntary health and welfare organizations to provide information on the nature and amount of expenses by function and program.

Question 9

Private not-for-profit organizations are not required to record depreciation expense.

Accepted Answer

Private not-for-profit organizations are required to record depreciation expense just like for-profit organizations. This is because depreciation is an essential component of matching expenses to revenues and accurately reflecting the organization's financial position.

Question 10

The financial statements of private not-for-profits are intended primarily for use by present and potential donors.

Accepted Answer

The financial statements of private not-for-profits are intended primarily for use by present and potential donors, as well as other stakeholders such as grantors, creditors, and regulatory bodies. These statements provide information about the organization's financial position, performance, and cash flows, which is critical for decision-making and accountability.

Question 11

All donated services are recognized as revenue.

Accepted Answer

Donated services do not result in revenue recognition as there is no exchange of goods or services for consideration. However, they may be disclosed in the financial statements as a contribution or support received.

Question 12

Present and potential donors are the primary users of private not-for-profit financial statements.

Accepted Answer

Private not-for-profit financial statements are primarily used by present and potential donors to assess the organization's financial health and performance. Other users may include regulators, grantors, and the organization's board of directors.

Question 13

Revenues must be presented separately in the Statement of Activities for the three classes (unrestricted,temporarily restricted,and permanently restricted).

Accepted Answer

According to Generally Accepted Accounting Principles (GAAP), revenues must be presented separately for each class of net assets in the Statement of Activities: unrestricted, temporarily restricted, and permanently restricted. This is to ensure transparency in reporting and to distinguish between funds that can be used immediately and those that have restrictions on their use.

Question 14

Expenditures,encumbrances,and budgetary accounts are not used by private not-for-profit organizations.

Accepted Answer

Private not-for-profit organizations typically use accrual accounting and do not use governmental accounting methods like expenditures, encumbrances, and budgetary accounts, which are more common in governmental entities.

Question 15

Performing arts organizations are an example of other private not-for-profit organizations.

Accepted Answer

Performing arts organizations, such as theater companies, dance companies, and orchestras, are typically classified as private not-for-profit organizations. They rely on donations, grants, and ticket sales to support their operations and fulfill their mission of providing cultural and artistic experiences to the public.

Question 16

FASB statement 116 requires contributions to be recorded as revenue when the contributed money is actually received.

Accepted Answer

FASB statement 116 requires contributions to be recorded as revenue when they are "unconditional" or "available for use" to the recipient organization, not just when the money is received.

Question 17

Conditional pledges should not be recognized as revenue until the conditions have been met.

Accepted Answer

This is in accordance with generally accepted accounting principles, which require revenue recognition only when conditions for recognition have been met, such as delivery of goods or completion of services. Conditional pledges may include requirements such as matching funds, specific use of funds, or meeting certain performance targets. Therefore, until these conditions are satisfied, the pledge is not considered revenue.

Question 18

A Statement of Functional Expenses,which is required for voluntary health and welfare organizations,presents a matrix of expenses classified by function and by object or natural classification.

Accepted Answer

This statement is true. The Statement of Functional Expenses is required for voluntary health and welfare organizations and presents expenses classified by function (such as program services, management and general, and fundraising) and by object or natural classification (such as salaries and wages, rent, and supplies).

Question 19

Contributions to be paid in future periods should be recorded at present value.

Accepted Answer

According to the accrual accounting principle, future expenses or contributions should be recognized at present value to accurately reflect the financial position of the company. This is done using various accounting techniques such as discounting future cash flows.

Question 20

While many private not-for-profit organizations use funds for internal purposes,the financial statements do not report separate funds.

Accepted Answer

Private not-for-profit organizations may use funds for internal purposes, but they are not required to report separate funds in their financial statements. Instead, they typically report on their financial activities as a whole.

Quiz 10: Accounting for Private Not-For-Profit Organizations

Voluntary health and welfare organizations promote the general health and well-being of the public.

FASB statement 116 requires unconditional pledges of support to be recorded as revenue when the contribution is promised.

Donated services should be considered revenue if the service creates or enhances a nonfinancial asset and requires a specialized skill which would have had to be purchased if not donated.

Cash flows must be presented separately in the Statement of Cash Flows for the three classes (unrestricted,temporarily restricted,and permanently restricted).

Expenses must be presented separately in the Statement of Activities for the three classes (unrestricted,temporarily restricted,and permanently restricted).

Donated fixed assets that have not yet been depreciated may be recorded as either unrestricted or temporarily restricted.

FASB statement 116 requires contributions to be recorded as revenue when the contribution is likely to be received.

A Statement of Functional Expenses is required for voluntary health and welfare organizations.

Private not-for-profit organizations are not required to record depreciation expense.

The financial statements of private not-for-profits are intended primarily for use by present and potential donors.

All donated services are recognized as revenue.

Present and potential donors are the primary users of private not-for-profit financial statements.

Revenues must be presented separately in the Statement of Activities for the three classes (unrestricted,temporarily restricted,and permanently restricted).

Expenditures,encumbrances,and budgetary accounts are not used by private not-for-profit organizations.

Performing arts organizations are an example of other private not-for-profit organizations.

FASB statement 116 requires contributions to be recorded as revenue when the contributed money is actually received.

Conditional pledges should not be recognized as revenue until the conditions have been met.

A Statement of Functional Expenses,which is required for voluntary health and welfare organizations,presents a matrix of expenses classified by function and by object or natural classification.

Contributions to be paid in future periods should be recorded at present value.

While many private not-for-profit organizations use funds for internal purposes,the financial statements do not report separate funds.