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GAAP For Non-Profits › Specific Financial Statement Items

Payables and Other Liabilities

A liability is an obligation, either moral or otherwise, to transfer benefits at some determinable, or reasonably estimated time.

Accounts Payable

Accounts payable are amounts owed to suppliers and others at the balance sheet date.

Accrued Liabilities, Provisions and Obligations

Accrued liabilities are amounts not legally owing at the balance sheet date. They are entries recorded to enable the organization to record expenses in the period in which they are incurred. The matching of expenses with the period of benefit requires the setting up of accrued liabilities. Accrued liabilities are often categorized along with accounts payable on the balance sheet.

Similar to an accrued liability is a provision or obligation. Provisions and obligations are also amounts that may not be legally owing at the balance sheet date. Provisions and obligations are set up in order to show the true financial position of the organization at the balance sheet date. They accrue for unavoidable obligations that may not be legally enforceable but exist nonetheless. There are numerous provisions and "obligations" that may appear on the balance sheet: for examples, a provision for site restoration, an obligations under a capital lease, or a pension plan obligation. (The accounting for site restoration costs is discussed under capital assets. Obligations under capital leases are discussed under leases.)

Demand Loans and Bank Overdrafts

There are no specific requirements for the accounting for demand loans and bank overdrafts, however certain recommendations for financial instruments will be relevant. A demand loan would be classified as a current liability.

Deferred Revenue

Deferred revenue is revenue that is received or receivable but not earned. Generally we are referring to sales and service revenue, as contributions not earned are referred to as deferred contributions.

Amounts that are received or receivable but not "earned" are deferred on the balance sheet, and then recognized in the statement of operations when earned. For example, prior to the year-end, the organization may receive membership fees for the next fiscal year. If these membership fees are to cover the cost of services to be provided in the next fiscal year, these fees would not be recorded as revenue when received but would be deferred on the balance sheet as a liability: the entry would be

  • dr. cash
  • cr. deferred revenue.
  • In the next year, when the revenue is "earned," the entry would be:
  • dr. deferred revenue
  • cr. revenue.

Disclosure of the Current Portion of Liabilities

Liabilities that will be settled within one year of the balance sheet date should be presented as current liabilities on the statement of financial position. (The current portion of deferred contributions would not be classified with current assets on the statement of financial position. Deferred contributions must be presented before net assets.)

Disclosure for Liabilities Secured by Assets

Where liabilities are secured by assets, the nature and carrying value of the secured assets should be disclosed. (3856.44)