Accounting for Not for Profit Organizations

Accounting Principles Applicable for Not for Profit Organization

Not-for-Profit Organization account for revenues and expenses using the accrual basis of
accounting.

Classification
The organization’s net asset, expenses, gains, and loses are classified according to the
three classes of net asset; unrestricted, temporarily restricted, and permanently restricted

Major sources of Revenues in Not-for-Profit Organization:

1. Contributions
2. Regular Type of Revenue

Private University/Colleges

Private Universities and Colleges had three major groups or revenues:

1. Educational and general revenues
2. Auxiliary enterprise revenues
3. Expired term endowment

Accounting for Expenses:

1. Educational and general revenues
2. Auxiliary enterprise revenues

Fund Groups – universities/colleges use these fund “groups” and major fund group
“subdivisions”

Fund Groups Major Subdivision

1. Current funds a. Current fund – unrestricted
b. Current fund – restricted
2. Loan Funds
3. Endowment fund and Similar funds a. Endowment Funds(pure)
b. Term Endowment Funds
c. Quasi-Endowment Funds
4. Annuity and Life Insurance Fund a. Annuity Funds
b. Life Income Funds
5. Plant Funds a. Unexpended plant fund
b. Funds for Renewal and Replacement
c. Funds for Retirement and Indebtedness
d. Investment in Plan Fund
6. Agency Fund

Illustrative Case:
Transactions Journal Entries
1. Received cash arising from:
Tuition Fee, P100, 000,
Contribution-
Unrestricted, P30, 000
Temporary restricted –Time P40,000
Permanently restricted-purposeP40,000
Permanently restricted, P10, 000
2. Payment of expenses of P35, 000, of
which 7,000 is from restricted(purpose)

3. Purchase equipment amounting to

P 25,000 and is financed with donor
restricted cash

Closing Entries
1. Closing entries for unrestricted net
assets:

2. Closing Entries for temporarily restricted

net asset

3. Closing entries for permanently

restricted net assets

Statement of Activities

Unrestricted Temporary Permanently

Revenue – Tuition
Fees
Contribution
Total
Net Assets Released
from restriction-
satisfaction of purpose
Total
Less: Expenses
Increase in Net Assets
Net Asset, beginning
Net Assets, ending

Balance Sheet

Assets Liabilities and Net Assets

Cash Liabilities
Equipment Net Assets
Unrestricted
Temporary
Permanently

Total Assets Total Liabilities and Net Assets