NOTES: NGO/NPO ACCOUNTING

Accounting for non-governmental non-profit organizations shall not apply for to organizations for
the direct benefits of members.
Resources are divided into three classes and restricted, temporarily restricted and permanently
restricted. Internal restrictions are not considered restrictions for non-profit organizations
accounting.
Funds to be invested indefinitely and artwork that must be preserved are considered as
permanent restrictions.
Statements required:
Financial position, Activities and Cash flows. Voluntary Health and Welfare Organizations are
required to report an additional statement Functional Expenses.
Revenues, expenses, gains and losses are reported on the full accrual basis. A revenue is
presumed to be unrestricted unless donor imposed restrictions apply, either for purpose or time.
Unconditional contributions receivable (pledges) are recorded as revenues. Multi-year
contributions receivable would be recorded at the present value of the future collections. Moneys
to be collected in the future should be presumed to be temporarily restricted (based on time
restriction) and then reclassified in the time of receipt. The difference between the previously
recorded present value and the current value would be recorded as contribution revenue and not
as interest. All contributions are recorded at fair value at the date of contribution.
Contributions are distinguished from exchange transactions and agency transactions. In contrast
to exchange transactions, nothing is given by the nonprofit organization in return for a
contribution. Exchange revenues (like tuition, membership fees, charges for services, etc.) are
treated as increase in unrestricted net assets and recognized in accordance with GAAP as applied
to business enterprises. As distinguished from contributions and exchange transaction, agency
transactions take place when a nonprofit organization is merely acting as a conduit for a
contribution to another organization and does not have variance power power to change a
donors intent. In such a case, the agent non profit organization should offset the asset received
with liability.
Plant is recorded as either unrestricted or temporarily restricted, and depreciated. Plant cannot
be recorded as permanently restricted because it is depreciated and upon depreciation, the
amount depreciated would be reclassified from temporarily restricted to unrestricted net assets.
Contributed services, when recognized are both revenue and expense. However, contributed
revenue is recognized only when services: (1) create or enhance nonfinancial assets, or (2)
require specialized skills, are provided by individuals possessing those skills, and would typically
be purchased if not provided by donation.
All expenses are reported as unrestricted. Expenses using resources that are temporarily
restricted would be matched by reclassification of resources from temporarily restricted to
unrestricted net assets. Reclassification are also called release from restrictions

COR JESU COLLEGE

SUNDAY COLLEGE DEPARTMENT

Sacred Heart Avenue, Digos City, Philippines

ACCOUNTING FOR GOVERNMENT AND NON-PROFIT ORGANIZATION

FINAL EXAMINATION
INSTRUCTOR: ANGELO ANDRO M. SUAN, CPA
I.

True or False

__f_____1.

Accounting for non-governmental

organizations for the direct benefits of members.

non-profit

organizations

shall

apply

to

___t____2. In Accounting for Non-profit organization, All expenses are reported as

unrestricted.
T 3. Plant is recorded as either unrestricted or temporarily restricted, and depreciated but plant
cannot be recorded as permanently restricted
T 4. Funds to be invested indefinitely and artwork that must be preserved are considered as
permanent restrictions.
T 5. In contrast to exchange transactions, in agency transactions, nothing is given by the
nonprofit organization in return for a contribution.
_f__6. supporting services is a classification of service which relate to expenses incurred in
providing the organizations social service activities.
__t__7. The Non Profit Organization is required to present three general purpose financial
statement, except for Voluntary Health and Welfare Organization which is required to present
additional statement.
__f__ 8. The Statement of Cash Flows on NPO provides information that affects the transactions
and other events and circumstances that change the amount and nature of net assets.
t 9. Operating expenses of hospitals are reported on an accrual basis. And the NPO regards Bad
debts as an expense.
F 10. The Philippine Accounting Standards set standards in accounting for NPO in Philippines.

Plant Fund

Non-profit
organizatio
n

Statement
of Financial
Position

Charity
Care
Services

Restricted
Fund

Statement
of
Functional
Expenses
COA

Fund

Statement
of

Endowment
fund

Agency
funds

Contractua
l
adjustmen
ts
Premium
fees

Imprest
Fund

appropriati
on

Fluctuatin
g Fund

Governmen
t

Accrual
Basis

Bureau of
Treasury

DBM

budget call

activities
allotment

straight line Obligation

Method

Identification:
______________1. Is a non-stock corporation that is organized for the benefit of the public
as a whole rather than for the benefit of an individual proprietor.

______________2. An indefinite revenue-producing investment, where only revenues from

these funds may be expended.
______________3. These are funds used in the acquisition of physical properties.
______________4. Available for current use but expendable only as authorized by the donor
of the asset.
______________5. This is the additional statement for Voluntary Health and Welfare
Organization.
______________6. Also known as subscriber fees or capitation fees, are revenues from
agreements which a hospital provides any necessary patient services for a specific fee.
______________7. These are services provided free of charge of patients who qualify under
hospitals policy.
______________8. Resources received by the institution which belong to others, such as
student body fees.
______________9. These are discounts arranged with third party payors that frequently
have agreements to reimburse at less than established rates.
______________10. It is the basic unit of the Non-profit organization.

MULTIPLE CHOICE (10 pts.)

1. A NPO gives donors a sweatshirt imprinted with its logo when they pay P150 dues. The
value of the sweatshirt is approximately P150. This transaction is mostly likely reported as:
a. An exchange transaction
b. An agency transaction
c. Contribution
d. A gift in kind
2. A statement of financial position, which reports unrestricted temporarily restricted, and
permanently restricted net assets, is required for which one of the following organizations?
I.
Public university
II.
A Private, not-for-profit hospital
a. Both I and II
b. I only
c. Neither I or II
d. II only
3. The unconditional promise to give are recognized as contribution revenue when:
a. Promise is received.
b. The related receivable is collected
c. The time or purpose restriction is satisfied
d. The future event that binds the promisor occurs
4. Net assets that are restricted by the governing board of a nongovernment not-for-profit
organization are reported as a part of:
a. Permanently restricted net assets
b. Temporarily restricted net assets
c. Unrestricted net assets
d. Either permanent or temporarily restricted net assets depending on the term of
restriction
5. John University, a private nonprofit university, had the following cash inflows during the
year ended December 31, 2015.
I.
P500,000 from students for tuition
II.
P300,000 from a donor who stipulated that the money be invested indefinitely
III.
P100,000 from a donor who stipulated that the money be spent in accordance to
the wishes of Johns board of directors
On Johns university Statement of cash flows for the year ended December 31, 2015 what
amount of these cash flows should be reported as operating activities:
a. P900,000
b. P400,000

c. P800,000
d. P600,000

6. Manila Museum, a non profit organization received contributions restricted for research
totaling P50,000 in 2014. Assume that the P50,000 was not expensed in 2014. These
contributions were used to purchase P35,000 of research equipment in 2015. As a result of

these transactions, for the year ended December 31, 2015, Manila Museum will report on
its statement of activities a
a. P35,000 increase in temporarily restricted net assets
b. P50,000 increase in temporarily restricted net assets
c. P35,000 increase in unrestricted net assets.
d. P15,000 increase in unrestricted net assets
7. Which of the following should be used in accounting for nonprofit organization?
a. Fund accounting and accrual accounting
b. Fund accounting but not accrual accounting
c. Accrual accounting but not fund accounting
d. Neither accrual nor fund accounting
8. Fund-raising expenses of nonprofit organizations are presented in the statement of activity
as:
Program
a.
b.
c.
d.

Services Expenses
Yes
Yes
No
No

Supporting Expenses
Yes
No
Yes
No

9. The following are the examples of Non-profit organizations, except:

a. Civic organization
b. University of the Philippines
c. Religious Organizations
d. Labor unions
10.A characteristic of NPO which means that it depends on the voluntary contributions of
citizenry except for foundations established by wealthy individuals.
a. Public service
b. No profit motives
c. Finance by the citizenry
d. Stewardship of resources
11.In 2015, St. Angels Hospital received an unrestricted bequest of common stock with a fair
market value of P50,000 on the date of receipt of the stock. The testator had paid P20,000
of this stock in 2013. St Angels Hospital should record bequest as
a. Non-operating revenue of P50,000
b. Non-operating revenue of P30,000
c. Non-operating revenue of P20,000
d. A memorandum entry only
12.Which prescribes the financial statements of non-profit-organizations
reclassifications is caused by which of the following?
I.
Expiration of donor-imposed conditions
II.
Expiration of donor-imposed restrictions
a. I only
b. Both I and II
c. II only
d. Neither I nor II

reporting

13.During 2015, UST Hospital purchased medicines for hospital use totaling P800,000.
Included in this P800,000 was an invoice of P10,000 that was cancelled in 2015 by the
vendor because the vendor wished to donate this medicine to UST. This donation of
medicine should be recorded as:
a. P10,000 reduction of medicine expense
b. An increase in other operating revenue of P10,000
c. A direct P10,000 credit to the general (unrestricted) funds balance
d. A P10,000 credit to the restricted fund balance.
14.In June 2015, San Antonio Hospital purchased medicine from Park Pharmaceutical Co. at a
cost of P1,000. However, Park notified San Antonio that the voice was being cancelled and
that the medicines were being donated to San Antonio. San Antonio should record this
donation of medicines as
a.
b.
c.
d.

Other operating revenue of P1,000

A P1,000 credit to operating expenses
A P1,000 credit to non-operating expenses
A memorandum entry only

15.Williams Hospital, a nonprofit hospital affiliated with a religious group reported the
following information for the year ended December 31, 2015:
Gross patient service revenue at the hospitals full established rates
P980,000
Bad Debts expense
10,000
Contractual Adjustments with third-party payors
100,000
Allowance for discounts to hospital employees
15,000
On the hospitals statement of operations for the year ended December 31, 2011,
what amount should be reported as net patient service revenues.
a.
b.
c.
d.

P865,000
P880,000
P855,000
P955,000

Pro Forma Entries:

Problem 1: Hospitals
Gross patient service (before charity care or contractual adjustments)
Charity Care for poor and indigent persons patients
Contractual adjustment allowed to Philhealth patients
Provision for doubtful accounts

P200,000
15,000
30,000
30,000

Required:
1. Record gross receipt patient revenue
2. Record contractual adjustments allowed to Philhealth
3. Record the provision of doubtful accounts
Problem 2: Pledge
A non-profit organization received unconditional pledges totaling to 300,000 in a fund raising
drive. 10% of the pledges are considered to be doubtful of collection. Make the following journal
entries:
1. Record pledges received
2. Record the 10% provision for doubtful pledges
Problem 3: Colleges and Universities
Gross Tuition fees
P500,000
Tuition waivers provided under fellowship program
50,000
Provision for doubtful accounts (5%)
25,000
Make
1.
2.
3.

the following journal entries:

Record educational and general tuition fees
Record tuition waivers
Record provision for doubtful accounts