Using the fictitious results of a fictitious organization named SpringTime, we have a chance to:
- understand some of the common journal entries of non-profit organizations and some of the journal entries unique to non-profits
- employ different acceptable methods of accounting using the same results
- present the financial statements in different formats
SpringTime is a small non-profit organization with a December 31 year end and is located in Springfield, Alberta. It runs one major program each year called the "Spring Fling." In the fall of every year, SpringTime begins collecting donations for the Spring Fling. SpringTime sometimes receives donations of capital assets, and has a loan for some major capital assets purchased years ago. Throughout the year, SpringTime sells flower pins to promote the event and raise additional revenues.
In posting the year 2000 journal entries for SpringTime we will:
- Enter the cash transactions for the year, previously recorded in our synoptic journal.
- Enter the opening balances, using the 1999 trial balance.
- Adjust opening contributions receivable for receipts during the year, record an inter-fund transfer and inter-fund payable.
- Adjust opening payables for amounts paid during the year, and accrue the year-end payable and prepaid.
- Set up the year-end receivable and allowance for doubtful accounts for flower pin sales.
- Adjust the ending inventory and record the cost of sales for flower pin sales.
- Recognize previously deferred Spring Fling contributions and defer the 2001 contributions.
- Record the contributed capital asset, defer the related contribution, and recognize capital contributions to match the amortization of assets.
- Record the purchase of a bond, the amortization of the premium on the bond and the accrued interest.
- Account for the current portion of long-term debt and account for a contribution for the repayment of the debt.
- How the entries are posted will differ if we follow fund accounting. The entries will differ significantly if we set up restricted funds.
To process the entries, we will continue with the accounting we began for SpringTime in our discussion of Fund Accounting.
In our discussion of fund accounting, we presented the 1999 results in three formats:
- a trial balance with no funds
- a trial balance with two general funds: an operating fund and a capital fund
- a trial balance with one general fund, an operating fund; and one restricted fund, a capital fund
Accounting for the results using these three different approaches will result in three different sets of financial statements.
The journal entries we must post where we have no funds and where we have two general funds will be identical, except where we post the opening balances, as our opening fund balances have been separated into two funds. As mentioned above, the real differences in accounting treatment will occur when we employ restricted funds.