analyse the accounting system in non profit organization
Answers
Accounting Systems for Non-Profit Organizations
Accounting systems for non-profits are designed to capture the organization’s financial position and its economic activities.
Non-profit organizations use two methods of accounting :
The cash method of accounting and ,
The accrual method of accounting.
The cash system records revenues when cash is received and records expenses when cash is paid . However , the cash method does not provide an accurate reflection of the economic condition of the not-for-profit organization (McCarthy, Shelmon, & Mattie, 2012).
Therefore , the accrual method is preferred. It requires that revenues are recorded when they are earned and the expenses when they are incurred. The 990 tax form should also be audited on the accrual basis at the end of the year for financial statement preparations following the GAAP principles.
These principles require revenues to be recognized during the accounting period that they are earned and become measurable while expenses should be recognized in the incurred period if measurable (McCarthy, Shelmon, & Mattie, 2012).
Non-profit organizations conduct various special events . For Example : fundraising activities that include campaigns , golf events, dinners , or galas . These have specific requirements for financial reporting. According to the professional accounting standards , special events are considered as fundraising events .