Questions about Bookkeeping for a non-profit social organization

Posted by NoSpam on August 10, 2008, 12:12 pm

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We're recently elected treasurer of a local social organization and are
being hassled by some accounting types as to how to present financial =
data
to the group. The argument is that we are not following GAAP precisely =
and
are doing things like:
(a) reporting P&L and Balance Sheet with mid-month ending dates,
(b) reporting expenses for events where there has been no income for the
current fiscal year,
(c) reporting certain pass-thru donations as "Other Income"

The organization has been doing accrual accounting via QuickBooks for the
last several years. However, there is no payroll, no inventory, no
customers, no taxes, no receivables, and rarely an accounts payable type =
of
transaction. =20

We feel like our mission is to handle the organization's finances with
care, according to an approved budget, and to provide the members a clear
view of the finances.

So my questions are:
(1) are items (a),(b),(c) above worth worrying about in our situation?
(2) should we be doing cash accounting instead of accrual accounting?

Thanks in advance for your advice!

Posted by aps on August 21, 2008, 7:15 am

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>We're recently elected treasurer of a local social organization and are

>being hassled by some accounting types as to how to present financial =

>data

>to the group. The argument is that we are not following GAAP precisely =

>and

>are doing things like:

>(a) reporting P&L and Balance Sheet with mid-month ending dates,

>(b) reporting expenses for events where there has been no income for the

>current fiscal year,

>(c) reporting certain pass-thru donations as "Other Income"

>The organization has been doing accrual accounting via QuickBooks for the

>last several years. However, there is no payroll, no inventory, no

>customers, no taxes, no receivables, and rarely an accounts payable type =

>of

>transaction. =20

>We feel like our mission is to handle the organization's finances with

>care, according to an approved budget, and to provide the members a clear

>view of the finances.

>So my questions are:

>(1) are items (a),(b),(c) above worth worrying about in our situation?

>(2) should we be doing cash accounting instead of accrual accounting?

>Thanks in advance for your advice!

For most non-profits the cash basis of accounting is preferred. The accrual
basis really
serves no purpose for a non-profit because cash receipts and disbursements is
the
correct name for a non-profit as opposed to Profit and Loss. You state you have
members and it is a social organization. The key should be to keep the
financial
records as simple as possible so everyone concerned understands and the cash
basis
certainly does that.

Posted by qbuser on August 23, 2008, 11:16 pm

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On Thu, 21 Aug 2008 06:15:52 -0500, "aps" <> wrote:

>For most non-profits the cash basis of accounting is preferred. The accrual

basis really

>serves no purpose for a non-profit because cash receipts and disbursements is

the

>correct name for a non-profit as opposed to Profit and Loss.

Could you please give us a couple of general tips on how to determine
if a NFP 501(c) corporation should use a cash or accrual basis
accounting system?

If a NFP has substantial assets and costs (5 to 6 figures usually)
would that automatically make an accrual basis accounting system
necessary or even mandatory per IRS requirements?

Thank you.

Posted by NoSpam on August 24, 2008, 1:42 am

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On Thu, 21 Aug 2008 06:15:52 -0500, "aps" <> wrote:

>>We're recently elected treasurer of a local social organization and are

>>being hassled by some accounting types as to how to present financial =3D

>>data

>>to the group. The argument is that we are not following GAAP precisely=

=3D

>>and

>>are doing things like:

>>(a) reporting P&L and Balance Sheet with mid-month ending dates,

>>(b) reporting expenses for events where there has been no income for =

the

>>current fiscal year,

>>(c) reporting certain pass-thru donations as "Other Income"

>>The organization has been doing accrual accounting via QuickBooks for =

the

>>last several years. However, there is no payroll, no inventory, no

>>customers, no taxes, no receivables, and rarely an accounts payable =

type =3D

>>of

>>transaction. =3D20

>>We feel like our mission is to handle the organization's finances with

>>care, according to an approved budget, and to provide the members a =

clear

>>view of the finances.

>>So my questions are:

>>(1) are items (a),(b),(c) above worth worrying about in our situation?

>>(2) should we be doing cash accounting instead of accrual accounting?

>>Thanks in advance for your advice!

>For most non-profits the cash basis of accounting is preferred. The =

accrual basis really=20

>serves no purpose for a non-profit because cash receipts and =

disbursements is the=20

>correct name for a non-profit as opposed to Profit and Loss. You state =

you have=20

>members and it is a social organization. The key should be to keep the =

financial=20

>records as simple as possible so everyone concerned understands and the =

cash basis=20

>certainly does that.

Thanks for your reply. It reinforces our conclusions exactly but there =
are
some accounting types in the group that have been adamant about what our
financial reports should look like. We like your renaming of the P&L -
makes perfect sense. =20

Your response is so good we going to quote you directly.

Thanks again.

Posted by aps on August 24, 2008, 5:45 am

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>On Thu, 21 Aug 2008 06:15:52 -0500, "aps" <> wrote:

>>>We're recently elected treasurer of a local social organization and are

>>>being hassled by some accounting types as to how to present financial =3D

>>>data

>>>to the group. The argument is that we are not following GAAP precisely=

> =3D

>>>and

>>>are doing things like:

>>>(a) reporting P&L and Balance Sheet with mid-month ending dates,

>>>(b) reporting expenses for events where there has been no income for =

>the

>>>current fiscal year,

>>>(c) reporting certain pass-thru donations as "Other Income"

>>>

>>>The organization has been doing accrual accounting via QuickBooks for =

>the

>>>last several years. However, there is no payroll, no inventory, no

>>>customers, no taxes, no receivables, and rarely an accounts payable =

>type =3D

>>>of

>>>transaction. =3D20

>>>

>>>We feel like our mission is to handle the organization's finances with

>>>care, according to an approved budget, and to provide the members a =

>clear

>>>view of the finances.

>>>

>>>So my questions are:

>>>(1) are items (a),(b),(c) above worth worrying about in our situation?

>>>(2) should we be doing cash accounting instead of accrual accounting?

>>>

>>>Thanks in advance for your advice!

>>For most non-profits the cash basis of accounting is preferred. The =

>accrual basis really=20

>>serves no purpose for a non-profit because cash receipts and =

>disbursements is the=20

>>correct name for a non-profit as opposed to Profit and Loss. You state =

>you have=20

>>members and it is a social organization. The key should be to keep the =

>financial=20

>>records as simple as possible so everyone concerned understands and the =

>cash basis=20

>>certainly does that.

>Thanks for your reply. It reinforces our conclusions exactly but there =

>are

>some accounting types in the group that have been adamant about what our

>financial reports should look like. We like your renaming of the P&L -

>makes perfect sense. =20

>Your response is so good we going to quote you directly.

>Thanks again.

NP, glad to help. One more thing that helps also. When you do your "Cash
Receipts
and Disbursments" statement, below the detailed income and receipts it helps the
users (recipients) to further understand the cash position of the organization
if you will
include the line, "Increase (Decrease) in Cash" for the reporting period.
Assuming it is
cash receipts and disbursements for August 31, 2008, You would include a line
below
the increase of decrease in cash entitled "Cash Balance, July 31, 2008" then on
the
next line, "Cash Balance, August 31,2008 to reconcile to your actual cash
balance
that ties to your checking account balance at the August EOM (end-of-month)
reporting period.

David Bemiss (Accountax Pro Svcs)