ACCOUNTING FOR GOVERNMENT AND NOT-FOR-PROFIT ORGANIZATIONS 55

Module 4

NOT-FOR-PROFIT ORGANIZATIONS

Overview
A non-profit organization is a group or institution organized for purposes other than generating
profit. Non-profit organization (NPO) is also called Non- Government Organizations (NGO) or
Nor-for-Profit Organizations (NFPO). A non-governmental organization (NGO) is a non-for-profit,
voluntary c
issues in support of the public good. (UNDP definition) Nonprofit organizations exist to pursue
missions that address the needs of society. This institutions depends on funds from
contributions, membership dues, program revenues, fundraising events, public and private
grants. The contributions or investments does not form income and do not have commercial
owners.

corporation, an individual enterprise (for example, individual

charitable contributions), unincorporated association, partnership, foundation (distinguished by
its endowment by a founder, it takes the form of a trusteeship), or condominium (joint ownership
of common areas by owners of adjacent individual units incorporated under state condominium
acts).

Non-profit organizations must be designated as nonprofit when created and may only pursue
purposes permitted by statutes for non-profit organizations. Non-profit organizations include
churches, public schools, public charities, public clinics and hospitals, political organizations,
legal aid societies, volunteer services organizations, labor unions, professional associations,
research institutes, museums, and some governmental agencies.

In the Philippines, not-for-profit organizations (NPOs) are typically organized as "non-stock

corporations" registered under the Corporation Code. This non-stock corporations are in the
form of charitable, religious, educational, professional, cultural, fraternal, literary, scientific,
social, civic service, or similar purposes, such as trade, industry, agricultural and similar
chambers, or any combination thereof
Securities and Exchange Commission (SEC) of the Philippines is the government regulatory
body for this organizations which serves as the registration authority. Other non-stock
corporations register as foundations. (Revised Corporation Code Section 87).

The basic concepts to nonprofit organizations for accounting and reporting are required by the
Financial Accounting Standards Board (FASB).

Businesses are organized to generate profits , nonprofits are organized to address he needs
of the society. With this, nonprofit organization prepares and issue a Statements of
Activities instead of the income statement normally prepared by for-profit businesses.
Since nonprofits do not have owners, there is no owner's equity or stockholders' equity and
there cannot be distributions to owners.
56 ACCOUNTING FOR GOVERNMENT AND NOT-FOR-PROFIT ORGANIZATIONS

The World Bank also describes non-government organizations (NPOs) as:

and that have primarily humanitarian or cooperative rather than commercial objectives. They are
private agencies in industrial countries that support international development; indigenous
groups organized regionally or nationally; and member-groups in villages. NPOs include
charitable and religious associations that mobilize private funds for development, distribute food
and family planning services and promote community organization. They also include
independent cooperatives, community associations, water-us

Module Objectives:

After thorough discussion of the topics, the learner will be able to:
Define and cite the characteristics of a not-for-profit organization
Compare government agencies with not-for-profit organizations
Define the different classification of funds.
Identify the accounts used in an NPO
Identify the different classification of net assets
Journalize typical transactions of an NPO
Prepare financial statements for not-for profit organizations
Present actual financial statements and compare with the concepts learned during the
classroom discussion

There are five structural-operational features that defined organizations within the NPO sector
as follows:
Organized - they have some structure and regularity to their operations, whether or not they
are formally constituted or legally registered. More than legal or formal recognition, this
qualification stresses organizational permanence and regularity, reflected in regular meetings, a
membership, and legitimate decision-making structures and procedures.
Private, - they are not part of the apparatus of the state, even though they may receive support
from governmental sources.

Not profit-distributing - they are not primarily commercial in purpose and do not distribute profits
to a set of directors, stockholders, or managers. While NPOs may generate a surplus from time
to time, they must reinvest these resources back into the objectives of their respective
organizations.

Self-governing - they have their own mechanisms for internal governance, are able to cease
operations on their own authority, and are fundamentally in control of their own affairs.
 ACCOUNTING FOR GOVERNMENT AND NOT-FOR-PROFIT ORGANIZATIONS 57

Voluntary - membership or participation in them is not legally required or otherwise compulsory.

The structural-operational features that defined the NPO
This fivefold definition encompasses organizations both formal and informal, religious and
secular, those with paid staff and those staffed entirely by volunteers and organizations
performing expressive functions (i.e., advocacy, cultural expression, community organizing,
environmental protection, human rights, religion, representation of interests, and political
expression) as well as those performing service functions (i.e., provision of health, education and
welfare services). This description does not take into account individual forms of citizen action
such as voting or writing to legislators, but it embraces most organized forms, including social
movements and community-based cooperatives serving solidarity objectives. Government
agencies, private businesses, commercial cooperatives and mutual have been deliberately
excluded.

NPOs as a Sector

and private sectors. This is in recognition of the distinct characteristics of NPOs from other forms
of organization especially from the commercial ones. Several studies reveal that NPOs contribute
significantly to the development of society and the economy.

In many countries, accounting pronouncements cater to the needs of commercial organizations.

Although fundamental accounting principles apply to any type of organization, appropriate
standards and guidelines for NPOs are needed to fit the specifications and peculiarities of these
organizations. Basic differences between commercial organizations and NPOs include the
following:

1) NPOs do not operate primarily for profit but for specific needs of a community, group,
organization or its membership.
2) Most of NPOs revenues come from funds contributed, donated, granted or given as other
forms of support. Revenues from income generating activities, if any, are eventually
plowed back to program operations.

Unlike in the business community where an exchange transaction occurs, in nonprofit

organizations, resource providers do not expect to receive either repayment or economic benefits
proportionate to the resources provided. There is no defined ownership interest that can be sold,
transformed or redeemed or that convey entitlements to a share to a residual distribution of
resources in the event that the organization is dissolved.
58 ACCOUNTING FOR GOVERNMENT AND NOT-FOR-PROFIT ORGANIZATIONS

3) NPOs have the responsibility to account for these funds designated for a specific purpose
for a specified period of time. The nature of the revenues received requires ensuring that
separate types of funds are properly tracked and reported.

NPO Governance and Accountability

efficiently and effectively, they must be governed by the principles of Fairness, Accountability,
and Transparency. Fairness - rights of stakeholders should be observed and respected;
Accountability - Board and management should be answerable on their performance to
stakeholders; Transparency - timely, accurate and sufficient information must be disclosed.

The foremost responsibility for NPOs is to be accountable to the needs and aspirations of the
community it is working with since serving community interests is the stated primary goal of most
NPOs. In practice, these communities lack mechanisms for holding NPOs accountable. Unlike
donors, communities cannot withdraw their funding; unlike governments, they cannot impose
conditionalities.

NPOs are also accountable to its donors, who may be both external (for example, governments,
foundations, or other NPOs) and internal (members who contribute smaller amounts). The
simplest level of responsibility is that of spending money for the purpose to which it has been
designated.

Lastly, NPOs are also accountable to its organization. They are responsible to their stated
mission, governing board, management and staff, partners, and to the NPO community as a
whole.
Financial accounting in NPOs, the topic of this guide, hopes to contribute significantly to helping
NPOs increase their capacity to express accountability to their different stakeholders.

Basic differences between commercial organizations and NPOs include the following:
1) NPOs do not operate primarily for profit but for specific needs of a community, group,
organization or its membership.

2) Most of NPOs revenues come from funds contributed, donated, granted or given as other
forms of support. Revenues from income generating activities, if any, are eventually
plowed back to program operations.

3) NPOs have the responsibility to account for these funds designated for a specific purpose
for a specified period of time. The nature of the revenues received requires ensuring that
separate types of funds are properly tracked and reported.
 ACCOUNTING FOR GOVERNMENT AND NOT-FOR-PROFIT ORGANIZATIONS 59

Unlike in the business community where an exchange transaction occurs, in nonprofit

organizations, resource providers do not expect to receive either repayment or economic benefits
proportionate to the resources provided. There is no defined ownership interest that can be sold,
transformed or redeemed or that convey entitlements to a share to a residual distribution of
resources in the event that the organization is dissolved.

Figure 1 Table compares the main financial statements of a nonprofit organization (NPO) with
those of a for-profit corporation

NON PROFIT ORGANIZATION FOR PROFIT CORPORATIONS

Statement of Financial Position Statement of Financial Position /Balance
Sheet
Statement of Activities Income Statement
Statement of Functional Expenses (by
Function and Nature)
Statement of Cash Flow Statement of Cash Flow
Notes to Financial Notes to Financial
Statements Statements

Statement of Financial Position

A nonprofit's statement of financial position is similar to a balance sheet that reports the
organization's assets and liabilities, but since this is a nonprofit organization there is no owner's
equity or stockholders' equity but as Net Assets.

The primary purpose of NPO is to provide programs that meet certain needs of society thru its
various activities, thus it issues Statement of Activities. The statement of activities reports
revenue and expense that is presented in accordance with the two classifications of net assets
With Donors Restrictions
Without Donor Restrictions

The net assets section of a nonprofit's statement of financial position requires at a minimum the
following:
Net assets
Without donor restrictions  xxx
With donor restrictions xxx
Total net assets xxx

These classifications are based on the restrictions made by the donors at the time of their
contributions.

1. Net assets without donor restrictions

If a donor does not specify a restriction on his or her contribution, the amount received by the
nonprofit is recorded as an asset and as contribution revenues. Unrestricted contribution
60 ACCOUNTING FOR GOVERNMENT AND NOT-FOR-PROFIT ORGANIZATIONS

revenues (reported on the statement of activities) also cause the amount of net assets without
donor restrictions to increase.

When the board of directors designates some of the nonprofit's unrestricted assets for a specific
purpose, those assets must continue to be reported as net assets without donor restrictions.

2. Net assets with donor restriction

When a nonprofit organization receives contribution that have donor-imposed restrictions, the
amount is normally recorded as an asset and as donor restricted contribution revenues. Donor-
restricted contribution revenues are reported on the statement of activities.

Statement of Activities
The statement of activities reports revenue and expense amounts in accordance with to the two
classifications of net assets illustrated in the Net asset. Below is an outline of the statement

Components of Statement of Activities:

Contributions
Membership dues
Program fees
Fundraising events
Grants
Investment income
Gain on sale of investments
Reclassifications when net assets are released from restrictions (a negative amount in
the With Donor Restrictions column and a positive amount in the Without Donor
Restrictions column)
Under the accrual method of accounting, revenues are reported in the accounting period in which
they are earned. In other words, revenues might be earned in an accounting period that is
different from the period in which the cash is received.

Reported Expenses and Losses

Expenses are reported according to

1. Program functions
2. Support functions
3.
1. Program functions
 ACCOUNTING FOR GOVERNMENT AND NOT-FOR-PROFIT ORGANIZATIONS 61

Program expenses (or program services expenses) are the amounts directly incurred by the
nonprofit in carrying out its programs. For instance, if a nonprofit has three main programs, then
each of the three programs will be listed along with each program's expenses.

2. Supporting functions
Support expenses are reported in two subgroups:

Management and general

Fundraising and development
In order to accurately report the amount in each of these subgroups, it may be necessary to
allocate some management and general salaries to fundraising based on the time spent by
employees performing fundraising activities.

A nonprofit's transactions are recorded in accounts in the general ledger. A listing of the titles of
the general ledger accounts is also known as the chart of accounts.
The accounts in the general ledger and in the chart of accounts are organized as follows:

statement of financial position accounts

o asset accounts
o liability accounts
o net asset accounts
statement of activities accounts
o revenues and gains
o expenses and losses
The number of accounts in a nonprofit's general ledger accounts depends on the number of
programs that the nonprofit has, the types of revenues it earns, and the level of detail required
for planning and control of the organization.

The Statement of Functional Expenses

The statement of functional expenses is reported in a matrix form to report expenses by their
function such as programs, management and general, fundraising and by the nature or type of
expense such as salaries, rent etc..
The FASB now requires every nonprofit to present expenses by function and nature in one place
(statement or notes).

The Statement of Cash Flows

The statement of cash flows of a nonprofit organization is similar a for-profit business. This
reports the change in the cash and cash equivalent during the accounting period.

The statement of cash flows consists of three sections:

62 ACCOUNTING FOR GOVERNMENT AND NOT-FOR-PROFIT ORGANIZATIONS

1. net cash from operating activities

2. net cash from investing activities
3. net cash from financing activities
The operating section reports the changes in cash other than those reported in the investing
and financing sections.
The investing section of the statement of cash flows reports the amounts spent to purchase
long-term assets such as equipment, vehicles and long-term investments. The investing section
also reports the amount received from the sale of long-term assets.
The financing section of the statement of cash flows reports the amounts received from
borrowings and also any repayments.
While the statement of cash flows, or cash flow statement, may be a bit difficult to prepare, it is
an important financial statement to be read.

The Notes to the Financial Statements

The notes to the financial statements are an integral part of all the statements prepared by an
NPO - the statement of financial position, the statement of activities, and the statement of cash
flows. The Accounting Standards Update No. 2016-14 requires important additional disclosures
regarding liquidity, restrictions, for creditors, donors, and among others.
Users and their Information Needs as applied to NPOs
EXTERNAL USERS
a. Donors/Grantors/Funding Agencies
- Degree of attainment of development objectives as indicated in financial statements and
reports.
- Degree of compliance with agreed amount and manner of using funds.
- Degree of compliance with prescribed financial accounting and reporting system and
procedures
b. Creditors (Banks/Financing Institutions)
- Information on ability to pay as indicated by ratios of solvency, liquidity, and stability as well as
status of their security.
c. Government Agencies
- Compliance with laws, government rules and regulations, payment of taxes (if any) and
reportorial requirements
d. General Public
- Effect of the activities of NPOs to the community and society in general

INTERNAL USERS
a. Members
- Information on how fees, donations, grants, and proceeds from fundraising activities were used.
 ACCOUNTING FOR GOVERNMENT AND NOT-FOR-PROFIT ORGANIZATIONS 63

- Other information needs such as managerial remuneration, use of assets, management

efficiency, etc.

b. Management Team
- Board of directors/trustees for policy-making, strategic decision-making, and fulfilling its
trusteeship/stewardship role.
Objectives of Financial Reporting
The primary objective of financial reporting by NPOs is to provide information about the financial
position, performance, and cash flows of the organization that is useful, and indeed, necessary,
for a wide range of users to engage in informed decision making.

Financial reporting prepared for this purpose meets the common needs of most users. However,
financial reporting does not provide all the information that users may need to make decisions
since they mostly portray the financial effects of past events.

Financial reporting also shows the results of the stewardship of management for the resources
entrusted to it. Those users who wish to assess the stewardship or accountability of management
do so in order that they may make sound decisions.
The financial reports of NPOs should complement other non-financial, performance reports.

The financial reporting is the means by which the information gathered and presented in financial
accounting is regularly communicated to those who use it.

Basis of Accounting
The basis of accounting affects the timing of recognition of income and expenses.
When a cash basis of accounting is used, income is recognized once it is received while expense
is recognized once it is paid. On the other hand, using an accrual basis means that income is
recognized when it is earned, even when it has not yet been received, and expenses are
recognized when they are incurred even when they have not yet actually been paid.
The basis of accounting used, as discussed and summarized above, affects the presentation of
the financial statements of the organization. In cash basis, a transaction is recorded only when
actual cash has been received or spent. Basically, only the movement of cash can constitute a
transaction. Under this basis of accounting, funds are recognized as receipts for the period if
these are actually.
Exemption
64 ACCOUNTING FOR GOVERNMENT AND NOT-FOR-PROFIT ORGANIZATIONS

In some countries, cash basis of accounting is allowed or required by local laws for NPOs. In
such cases, NPOs may use the cash basis.

Assumption of Going-Concern
The financial statements are normally prepared on the assumption that an NPO is a going
concern, and will continue to be in operation for the foreseeable future. It is thus assumed that
the NPO has neither the intention nor the need to liquidate or scale back its operations; if such
an intention or need exists, the financial statements may have to be prepared using a different
basis, in which case, this basis should be disclosed.
There are instances where an NPO is established ad hoc or its existence is limited to a specific
period. In this case, the management of an ad hoc NPO should properly disclose its nature and
terms of existence, as well as the implications of its ad hoc nature on its financial statements.

Qualitative Characteristics of Financial Statements

These are the attributes that make the information in financial statements useful to various NPO
stakeholders, who are the users of the information. An essential quality of the information
provided is its understandability by users.

a. Relevance. Information has the quality of relevance when it influences the decisions of
users by helping them evaluate past, present or future events or confirming, or
correcting their past evaluations.

1. Materiality. Information is material if its omission or misstatement could

influence the decision of users taken on the basis of the financial statements.

2. Timeliness. Accounting information must be available on time when needed if it

is to influence decisions. Lack of timeliness reduces relevance.

b. Reliability. Information is reliable when it is free from material error and bias and can
be depended upon by users to embody faithfully the representation contained therein.

1. Faithful Representation. To be reliable, information must represent faithfully the

transactions and other events that it either purports to represent or could reasonably be
expected to represent.

2. Substance over form. Transactions and other events are accounted for and
presented in accordance with their substance and not merely their legal form.

3. Neutrality. Information must be free from bias. Financial statements are not
neutral if, by selection or presentation of information, they influence the making of a
decision or judgment in order to achieve a predetermined result or outcome.
 ACCOUNTING FOR GOVERNMENT AND NOT-FOR-PROFIT ORGANIZATIONS 65

4. Prudence. Some degree of caution in the exercise of the judgments needed in

making the estimates required under conditions of uncertainty, such that assets or
revenues are not overstated and liabilities or expenses are not understated.

5. Completeness. Information must be complete within the bounds of materiality.

Omission may cause information to be false or misleading and thus unreliable and
deficient in terms of its relevance.

c. Comparability. Users must be able to compare the financial statements through time in
order to identify trends in its financial position and d. Understandability. An essential
quality of the information provided in financial statements is that it is readily
understandable by users.

Balance between Qualitative Characteristics

In practice, a balancing, or trade-off, between qualitative characteristics is often necessary.
Generally, the aim is to achieve an appropriate balance among the characteristics in order to
meet the objective of financial statements. The relative importance of the characteristics in
different cases is a matter of professional judgment.
Fair Presentation

position, performance, and changes in financial position. Although this framework does not deal
directly with such concepts, the application of the principal qualitative characteristics and of
appropriate accounting standards normally results in financial statements that convey what is
generally understood as presenting fairly such information.

Accounting procedures peculiar to specific types of NPOs

The principles that we have discussed so far apply to all types of NPOs. In this section, we will
discuss accounting procedures unique to specific types of NPOs. For this purpose, we will
subdivide NPOs into the following:
1. Health Care Organizations
2. Private, non-profit, Colleges and Universities
3. Voluntary Health and Welfare Organizations
4. Other non-profit organizations

Health Care Organizations

Health Care Organizations include hospitals, clinics, medical group practices, individual practice
associations, individual practitioners, emergency care facilities, laboratories, surgery centers,
other ambulatory care organizations, continuing care retirement communities, health
maintenance organizations, home health agencies, nursing homes, and rehabilitation centers.

the
following are the accounting requirements unique to health care organizations:
66 ACCOUNTING FOR GOVERNMENT AND NOT-FOR-PROFIT ORGANIZATIONS

1. Components of a complete set of financial statements

2. Presentation of revenues in the statement of operations
3. Presentation of contributions in the statement of operations
4. Disclosure of performance indicator
Financial statements of a health care organizations

counting Guide, health care

organizations shall prepare the following statements:
a. Statement of financial position
b. Statement of operations (in lieu of a statement of activities)
c. Statement of changes in net assets
d. Statement of cash flows, and
e. Notes to the financial statements.
Presentation of revenues in the statement of operation

Revenues in the statement of operations are classifies into the following:

a. Net patient revenue gross patient service revenue less contractual adjustments,
employee discounts and billed charity care.
b. Premium revenue results from capitation agreements
c. Other revenues all other revenues not classifiable as net patient revenue or premium
revenue.
Contractual adjustments

-party payors, such as the Philippine

Health Insurance Corporation (PhilHealth) and other health insurance providers. In this regard,
a contractual adjustment may arise from the reimbursement agreement.

A contractual adjustment is the difference between what the hospital considers a fair price for
a service rendered versus an agreed upon amount for the service with the insurance company.

For example, the hospital may consider P60,000 a pair price for a service but agrees with
PhilHealth to accept only P58,000. The difference of P2,000 represents the contractual
adjustment which is written off as a direct reduction to patient service revenue.

Employee discounts

members) in the form of reduction in the price of patient services. Employee discounts are
accounted for as direct reduction to patient service revenue.

Charity care

Charity care pertains to free services rendered to patients. Charity care is not recognized but
rather disclosed only in the notes.

Capitations agreements
 ACCOUNTING FOR GOVERNMENT AND NOT-FOR-PROFIT ORGANIZATIONS 67

Capitations Agreements are agreements with third parties based on the number of employees
instead of services rendered. SFAS No. 117 requires revenues from capitation agreements to

which is a line item below net patient revenue.

Other revenues

Other revenues consist of revenues other than patient service revenues and premium revenues.

educational programs, donated materials and services.

Presentation of contributions in the statement of operations

Unlike for other NPOs, health care organizations do not present restricted contributions on
the statement of operations as part of revenues. The revenues discussed above (i.e., net patient
service revenues, premium revenues, and other revenues) pertain only to unrestricted
revenues and may include revenues from unrestricted contributions. Revenues from unrestricted
contributions may be separately indicated as such or included in the other revenues
classifications.

Revenues from restricted contributions are presented separately at the bottom part of the
statement of operations, after unrestricted revenues and expenses.

Disclosure of performance indicator

According to the AICPA Guide, the statement of operations shall provide a performance
indicator, such as operating income, revenue over expenses, etc. The policy used in
determining the performance indicator shall be disclosed in the notes.

Unrealized gains and losses on investments in securities are not a part of the performance
indicator, but shall be reported on the statement of operations after the performance indicator.

Private, non-profit, Colleges, and Universities

The accounting procedure that is unique to private, non-profit, colleges and universities is the
accounting for scholarships and fellowships. The concepts are provided below:
a. Scholarships and fellowships granted freely are treated as direct reduction of
revenues from tuition and fees, e.g., academic scholarship.
b. Scholarships and fellowships granted as compensation for services rendered by the
grantee are treated as expenses , e.g., academic scholarships provided to student
assistants and faculty members or their dependents,
c. Refunds of tuition fees from class cancellations and other withdrawal of enrolment are
treated as direct reduction of revenues from tuition and fees.
Voluntary Health and Welfare Organizations

Voluntary Health and Welfare Organizations (VHWO) are non-profit entities that derive their
revenues primarily from donations from the general public to be used for purposes connected
68 ACCOUNTING FOR GOVERNMENT AND NOT-FOR-PROFIT ORGANIZATIONS

welfare societies, human rights advocates, environmental protection organizations, religious

organizations, museums and other cultural and arts societies, libraries, research and scientific
foundations, professional associations, private elementary schools, social clubs, and fraternal
organizations.

Other non-profit organizations

Other general accounting requirements for NPOs apply to other non-profit organizations. Thus,
there are actually no accounting requirements peculiar to these organizations.
Sample Financial Statements

To present examples of the statement of financial position and the statement of activities we
will follow the activities of Almost Family a nonprofit organization called a daytime shelter for
adults.

Let's assume that Almost Family a Not for Profit Organization was incorporated in January
2019 and its accounting years end on each December 31. The following transactions occurred
during a three-month period.

Transaction 1. On January 31, a donor contributes P100,000, without restriction, for the
operation of Almost Family. This transaction affects the general ledger accounts as follows:

January 31, Cash general 100,000

Revenues: Contributions General 100,000

Transaction 2. On February 1, rents office space and paid with A check for P2,000. This
covers a one-time security deposit of P1,000 plus the February office rent of P1,000.
February 1, Security Deposit 1,000
Rents Expense 1,000
Cash General 2,000.

Transaction 3. On February 2, a P400 check is written to the utility as a one-time security

deposit for electricity and heat service.
February 2 Security Deposit 400
Cash General 400.

Transaction 4. On February 19, Almost Family receives a contribution of P8,000 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:
February 19
Money Market Account- Donor Restricted 8,000
Revenues: Contributions with Donor Restrictions 8,000
 ACCOUNTING FOR GOVERNMENT AND NOT-FOR-PROFIT ORGANIZATIONS 69

Transaction 5. The electricity and heating invoice has not arrived. It is estimated that the
amount for February's usage was P350, so the following accrual adjusting entry is recorded on
February 28:
February 28
Electricity and Water expenses 350
Accrued Expenses 350

Almost Family
Statement of Financial Position
February 28, 2019

Cash and Cash

equivalents P 15,600.00 Accrued Expenses P 350.00

Security Deposits 1,400.00 Net Assets

- Without Donors
Furniture Restrictions 8,650.00

With Donors Restrictions 8,000.00

Total Net Assets 16,650.00

Total Liabilities and Net
Total Assets P 17,000.00 Assets P 17,000.00

Almost Family
Statement of Financial Position
For two months ended February 28, 2019

Without Donors With Donors Total

Restrictions Restrictions

Revenue: P 10,000.00 8,000.00 18,000.00

Contributions
Expenses:
Program Expenses -
Gen. Admin. Expenses 1,350.00 1,350.00
Fund Raising Expenses

Change in Net Assets - 1,350.00 8,000.00 16,650.00

Net Asset- beginning

Net Asset -ending 8,650.00 8,000.00 16,650.00

70 ACCOUNTING FOR GOVERNMENT AND NOT-FOR-PROFIT ORGANIZATIONS

Note that the ending net assets amount must be the same amount on the net assets reported in the Statement of
financial position on the same period

During March, Almost Family paid the March rent of P1,000. Almost Family also paid the
February utilities which were equal to the estimated amount of P350. Almost Family estimates
that March's utilities will be P300.

On March 31, Almost Family paid P8,300 to purchase furniture (using the donor-restricted
donation of P8,000). The statement of financial position dated March 31 will report the following
amounts:

Almost Family
Statement of Financial Position
March 31, 2019

Cash and Cash equivalents 5,950.00 Accrued Expenses 300.00

Security Deposits 1,400.00 Net Assets

- Without Donors
Furniture 8,300.00 Restrictions 15,350.00
Total Net Assets

Total Assets 15,650.00 Total Liabilities and Net Assets 15,650.00

Almost Family
Statement of Activities
March 31, 2019

Without Donors With Donors Total

Restrictions Restrictions
Revenue: P
Contributions 8,000.00 - 8,000.00 -
Net asset released fr Restriction 8,000.00 - 8,000.00 -
Expenses:
Program Expenses -
Gen. Admin. Expenses 1,300.00 1,300.00
Fund Raising Expenses
Total Expense 1,300.00 1,300.00
Change in Net Assets 6,700.00 - 8,000.00 - 1,300.00
Net Asset- beginning 8,650.00 8,000.00 16,650.00
Net Asset -ending 15,350.00 - 15,350.00

Note that the ending net assets amount must be the same amount on the net assets reported in the Statement of
financial position on the same period
 ACCOUNTING FOR GOVERNMENT AND NOT-FOR-PROFIT ORGANIZATIONS 71

Definition of Terms
Unrestricted available for immediate use and for any purpose.
Temporarily restricted restricted by the donor in such a way that the availability of the

Organized, i.e., they have some structure and regularity to their operations, whether or not they
are formally constituted or legally registered. More than legal or formal recognition, this
qualification stresses organizational permanence and regularity, reflected in regular meetings, a
membership, and legitimate decision-making structures and procedures.
Private, i.e., they are not part of the apparatus of the state, even though they may receive support
from governmental sources.
Not profit-distributing, i.e., they are not primarily commercial in purpose and do not distribute
profits to a set of directors, stockholders, or managers. While NPOs may generate a surplus from
time to time, they must reinvest these resources back into the objectives of their respective
organizations.
Self-governing, i.e., they have their own mechanisms for internal governance, are able to cease
operations on their own authority, and are fundamentally in control of their own affairs.
Voluntary, i.e., membership or participation in them is not legally required or otherwise
compulsory.

NPO include many groups and institutions that are entirely or largely independent of
government and that have primarily humanitarian or cooperative rather than commercial
objectives.
Program services are the activities that result in goods and services being distributed to
beneficiaries, customers, or members that fulfill the purposes or mission for which the
organization exists. Those services are the major purpose for and the major output of the
organization and often relate to several major programs.

Supporting activities are all activities other than program services. Generally, these include
management and general, fund-raising, and membership-development activities.

Read:
IFRS 15
Republic Act 11232, or the Act Providing for the Revised Corporation Code of the Philippines,
FASB issued Accounting Standards Update (ASU) No. 2016-14 for Not-for-Profit
NGOs Act RA 10693
Tax Code Section 30(e), (g), and (h)).
Revenue Memorandum Order 20-2013 Section 5(b))