20 - 0 advanced accounting by debra jeter and paul chaney chapter 20: accounting for nongovernment...
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Advanced Accounting by Debra Jeter and Paul Chaney
Chapter 20: Accounting for Nongovernment Nonbusiness
Organizations: Colleges and Universities, Hospitals, and Other Health Care Organizations
Slides Authored by Hannah Wong, Ph.D.Rutgers University
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Sources of Accounting Standard
First level of priority FASB Statement and Interpretations APB Opinions AICPA Accounting Research Bulletins
Second level of priority FASB Technical Bulletins AICPA Industry Audit and Accounting
Guides
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Sources of Accounting Standard
Third level of priority Consensus positions of the FASB
emerging issues task force AICPA AcSec Practice Bulletins
Fourth level of priority AICPA Accounting Interpretations Implementation guides Industry practices
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Basic Financial Statements
Statement of financial position Asset categories:
Unrestricted net assetsTemporarily restricted net assets
(donor imposed restriction)Permanently restricted net assets
(endowments)
Statement of activities
Statement of cash flows
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Basic Funds
Current fund unrestricted fund (general fund - hospitals) restricted fund (special purpose fund -
hospitals)
Plant fund
Endowment fund
Loan fund
Agency or custodial fund
Annuity and life income fund
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Restricted VS Unrestricted Funds
Current unrestricted funds financial resources that may be
expended at the discretion of the governing board
Current restricted funds
resources restricted because of legal, contractual, or
external restrictions on their use
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Board Designated Funds
Part of current unrestricted fund
resources designated by governing board for specific purposes, projects, or investment
to limit discretion of management
governing board can modify designations at will
= assets whose use is limited in hospitals
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Mandatory VS Nonmandatory Transfers
Unique to colleges and universities
Mandatory transfers transfers from the current funds group to
other fund groups arising frombinding legal agreementsgrant agreements
Nonmandatory transfers transfers from the current funds group to
other fund groups at the discretion of the governing board
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Contributions
Pledges receivable 300,000
Revenue - contributions 300,000
Pledges
To record gross amount of campaign pledges
Expenses - Provision for uncollectible pledges 45,000
Allowance for uncollectible pledges 45,000
Estimated Uncollectible Pledges
To record provision for estimated uncollectible pledges
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Contributions
Management and general expense 21,000
Donated services revenue 21,000
Donated Services
Donated services are recognized only if the services received:(1) require specialized skills(2) are provided by individuals possessing those skills and(3) would need to be purchased if not provided by donation
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Plant Funds - Colleges
4 Self-balancing subgroups:
unexpended plant fund resources used to purchase property,
plant and equipment similar to capital project fund in
governmental accounting
funds for renewals and replacements similar to capital project fund in
governmental accounting
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Plant Funds - Colleges
funds for retirement of indebtedness resources to be used to retire or pay
interest on debt incurred in acquisition of property
similar to debt service fund in governmental accounting
Investment in plants property, plant and equipment, related
debt, and net investment in plan similar to a combination of the account
groups in governmental accounting
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Plant Funds - Colleges
Nonmandatory Transfer to plant fund 50,000
Cash 50,000
Current Unrestricted Fund
Cash 750,000
Notes payable 500,000
Revenue - contributions - restricted 200,000
Fund balance - unrestricted 50,000
Unexpended Plant Fund
To record receipt of resources
To record transfer to plant fund
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Plant Funds - Colleges
Land 750,000
Cash 750,000
Unexpended Plant Fund
To record acquisition of land
Fund balance - restricted 200,000
Fund balance - unrestricted 50,000
Notes payable 500,000
Land 750,000
To transfer assets and liabilities to investment in plant fund
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Plant Funds - Colleges
Land 750,000
Notes payable 500,000
Net investment in plant 250,000
Investment in Plant Fund
To record acquisition of land and related indebtedness from the unexpended plant fund
Fund balance - restricted 200,000
Cash 200,000
Interest expense 20,000
Cash 20,000
Funds for Retirement of Indebtedness
To record payment of principal and interest on indebtedness
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Plant Funds - Colleges
Notes payable 200,000
Net investment in plant 200,000
Investment in Plant Fund
To record reduction in indebtedness
Depreciation expense 235,000
Accumulated depreciation 235,000
To record depreciation on property, plant and equipment included in the assets of the investment in plant fund
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Plant Funds - Hospitals
PPE transactions of hospitals are recorded in the general fund
contributed resources restricted for acquisition of PPE are recorded in a plant replacement and expansion (restricted) fund
upon expenditure, the assets acquired and the plant fund balance are transferred to the general fund
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Endowment Funds
Cash 400,000
Due to unrestricted fund 250,000
Due to restricted fund 150,000
Endowment Fund
To record receipt of dividend and interest
Due from endowment fund 250,000
Unrestricted income 250,000
Current Unrestricted Fund
To record unrestricted endowment fund income
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Endowment Funds
Due from endowment fund 150,000
Restricted income 150,000
Current Restricted Fund
To record restricted endowment fund income
Research expense 100,000
Cash 100,000
To record payment of research grant
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Accounting for Investments
Cash 800,000
Revenue - contributions - unrestricted 800,000
To record unrestricted contribution
Equity investments 800,000
Cash 800,000
To record purchase of marketable securities
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Accounting for Investments
Cash 30,000
Investment income - unrestricted 30,000
To record receipt of dividend
Equity investments 20,000
Unrealized gain on investment - unrestricted 20,000
(1) investment in equity securities with readily determinable fair values and all debt securities should be recorded at market value(2) unrealized gains and losses are recognized
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Loan Funds
To account for loans to students and staff of
colleges, loans to employees of hospitals loans to beneficiaries of the interests
of certain ONNOs
revenues and expenses must be recognized on an accrual basis
generally revolving
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Annuity and Life Income Funds
Annuity funds the organization receives contribution
of assets and makes periodic payments of a stated amount to a beneficiary
Life income funds the amount of payment
varies depending on the earnings of the fund
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Annuity Funds
Investments 325,000
Annuity payable 268,400
Revenue - contributions- permanent restriction 56,600
To record establishment of fund
Cash 26,000
Annuity payable 26,000
To record investment income
Annuity payable 26,000
Cash 26,000
To record annual annuity payment
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Issues Relating to Hospitals
Charity care
Contractual allowances
Capitation revenues
malpractice
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Advanced Accounting by
Debra Jeter and Paul Chaney
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