Accounting for Governmental
Quiz 11 :
College and University Accounting
Answers will vary depending on statements obtained.
a. (1) GSAB (Governmental Accounting Standard Board) has primary authority over setting accounting standards over government colleges and universities. (2) Statement of Net assets, Statement of Revenues, Expenses and Changes in Net Assets and Statement of Cash flows are the required Financial statements. (3) The following Equity accounts are required: Net Assets (Position) showing Unrestricted, Restricted and Net investment in capital assets. b. (1) FASB (Financial Accounting Standard Board) has primary authority over setting accounting standards over private, not-for-profit colleges and universities. (2) Statement of Financial position, Statement of Activities and Statement of cash flows are the required financial statements. (3) The following Equity accounts are required: Net Assets: Unrestricted, Restricted, and Permanently Restricted. c. (1) FASB (Financial Accounting Standard Board) has the primary authority over setting of accounting standards over investor-owned schools. (2) Statement of Financial position (Balance sheet), Income Statement, Statement of Changes in Equity and Statement of Cash flows. (3) The following Equity accounts are required: Owner's equity: Paid-in-capital and Retained earnings.
Private and not-for-profit accounting The accounting for private not-for profit is undertaken as per Financial Accounting Standard Board authoritative standard. The accounting is based on accrual system of accounting. Four financial report are prepared by the organization which include statement of financial position namely balance sheet, statement of activities namely income and expense statement, statement of cash flows and notes to financial statement. There are three types of net assets maintained as party of equity section which are permanently restricted, unrestricted and temporarily unrestricted. a. The three net assets classes required under FASB Statement 117 are described below: Unrestricted : Unrestricted net assets are inflows which arise from operating activity of the college which are tuition and fees, appropriations by government, contribution which are not for specific purpose that is unrestricted. Temporarily restricted: These include inflows which are restricted for temporary purpose which could include purchase of assets, term endowments. These net asset would decrease with payment for restrictions and payment for annuity and life insurance. Permanently restricted: These include inflows which are restricted permanently and include contribution for endowments or for plant acquisition or museum. b. The financial reports required under FASB Statement 117 are provided below: Statement of financial position which is similar to balance sheet for other business organization. This statement reflects the assets and liabilities position as on date. Statement of activities which is similar to income statement of other business organization. This statement shows the revenue earned and expenses incurred by college and universities. Statement of cash flows provides the cash provided or used by operating, financing and investing activities of the university. It shows the changes in cash during the year. Statement of functional expenses: This statement is prepared by voluntary health and welfare organizations. Notes to financial statement: This provides a more detail regarding the amount inputted in balance sheet and income statement. They also include accounting policy used by the organization. c. Endowment fund is where the donor contributes permanent cash which is either restricted or unrestricted. Term endowment is where donor contributes the cash for certain period of time which are invested and then is asked to release. These assets are classified as temporarily restricted. In case the donor contributes the amount as unrestricted gift and institution board decides to create endowment of the fund then it is classified as quasi endowment. d. 1. Endowment gift when are received in cash the journal entry recorded is cash debited and contribution - permanently restricted is credited. The income from endowment is either restricted or unrestricted and some of income would be added to endowment. The amount reported as income would be reported appropriately in net assets. 2. In 2011, the amount received would be recorded as gift and cash would be debited and contribution temporary would be restricted. In 2012, this amount received would be reclassified from unrestricted to restricted net assets. The cash received in pledge is recorded at beginning of the year. 3. In this case the amount received is debited to cash and credited to contribution temporary restricted for purchase of plant. In 2012, when the purpose is of fund is completed the amount would be reclassified as temporary restricted to temporary unrestricted. Also, the firm would record expense in the unrestricted net assets. e. Contributed services are reported as revenue if any one of the two conditions are fulfilled. The contributed service should be able to enhance nonfinancial assets or person providing the services would require specialized skills to be provided. The other condition is that revenue should be provided by donation which are either purchased or donated.