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Leadership & Responsibility
Chapter 27 covers the principal tax requirements for not-for-profit entities. There are several issues that affect not-for-profits, including tax status, filing requirements, state tax reporting issues, donor-advised funds and restrictions. Every organization needs to pass a test to become a charitable organization-based for tax purposes. This is to ensure that only charitable ventures receive tax exempt status, to avoid having for-profit entities defraud the American people. Private foundations are subject to different taxation than public charities, and these taxes include on sponsorship and unrelated business income, and also investment income. It is legal obligation for managers to understand the tax status of their organization and file/pay taxes according to the laws surrounding that status. Most charitable organizations also need to meet the conditions of that status, including the prohibition on lobbying and political activity.
E-commerce is an emerging field for charitable...
The IRS is currently working to update the legal framework for e-commerce endeavors or not-for-profit entities. The tax treatment of corporate sponsorships comes with strict guidance when it appears in online format, for example, so the ethical leader needs to understand this legal framework.
Exempt organizations still need to file an annual information return with the IRS, and private foundations have their own forms that they need to submit to the IRS as well. For organizations such as private foundations that need to pay taxes, there is an electronic filing option. The chapter goes into detail all of the elements of financial reporting for different types of non-for-profit entities, highlighting specific points of policy guidance along the way. The author makes a point to remind the reader that states usually have their own needs with respect to the information not-for-profit entities must provide to the state. The…
Chapter 28 covers auditing. A special type of audit is the A-133 audit, which the author outlines in detail and differentiates from a financial statement audit. Some findings need to be reported, and most auditor findings should be addressed by management because they represent something that is wrong with the financials of the organization.
Chapter 29 covers bookkeeping. As with accounting, there are different types of bookkeeping as well. The first of these is the simplest, cash-basis bookkeeping. Cash basis is a simple ledger that tracks cash transactions. Every transaction has an offsetting credit and debit. This allows every movement of cash to be understood, so that all expenses and sources of revenue are known. A trial balance is basically a cash-basis balance sheet.
A checkbook system is a fairly informal type of bookkeeping. The author argues that this system is familiar because everybody keeps a personal checkbook, but in 2014 that maybe needs to be updated, because today we need to learn these principals. The checkbook system is simply to record each disbursement and every time money comes in, simply noting where it came from or where it went. When this process becomes more formal and the information is tabulated at the end of the year, this becomes a bookkeeping system. Bookkeeping systems are still cash accounting, but a more formalized type than the checkbook system. The ethical leader will need to ensure that there are controls on cash disbursements, which is something that can be done with a bookkeeping system that records all transactions, especially all cash transactions and properly accounts for the sources and disbursements of cash.
Accounting Re: Accounting Policies The company is facing a challenge where it does not have the cash needed to pay employee salaries. Although the company shows a profit, it has negative cash flow at present. Understanding how cash accounting and accrual accounting works will highlight how this situation has come to be. Cash accounting is accounting via cash flows which is a simple methodology, typically used by small business. It is relatively
The major difference between cash and accrual basis accounting lies in when the expenses and revenues are recorded or recognized. The cash basis method accounts for revenues when money is actually received regardless of when the invoice was issued. Expenses on the cash basis accounting method are recorded when they are paid out and not when they were invoiced. The cash basis method is mostly used for personal finances and
Cash Basis vs. Accrual Basis The cash basis of accounting is more likely to be used by service businesses than by retail or manufacturing businesses. Service businesses usually do not need equipment and can sell a service they perform with nothing more than their own hands and minds. Think of people who are lawyers, writers, public relations and advertising personnel, and accountants.. (Edmonds, McNair, Milam, and Olds, Fundamental Financial Accounting Concepts,
The balance sheet presents the three elements of financial position namely, assets, liabilities and equity. The balance sheet highlights the accounting equation which provides: Assets = Liabilities + Equity. In a balance sheet presentation, assets and liabilities are further classified into current and non-current to distinguish those used directly for operations as to those for long-term usage. An income statement is a formal statement prepared for a given period
Accounting This discussion contains research pertaining to the impact of cash-basis accounting on the distortion of the financial position and operating results of a business. We began our discussion with a definition of cash base analysis. We concluded that this accounting tactic is used to examine cash and cash equivalents. This is done by separating cash flow transaction into one of three activities which include; operating, financing and investing activities. Our investigation then
Accounting Practices Depending on the type and size of a particular health care facility, the generally accepted accounting principles (GAAP) used to conduct medical accounting can vary greatly, and these differences may have significant impact on the eventual delivery of medical services. According to the Financial Accounting Standards Board's (FASB) Accounting Standards Codification, which is "the source of authoritative generally accepted accounting principles (GAAP) recognized by the FASB to be