Question

1. In a not-for-profit organization, donations received for a particular purpose are recorded as Net Assets without donor restrictions. Donations that are cannot be spent, but the earnings can be are referred to as Net Assets without donor restrictions. Profits and donations with no donor specifications are referred to as Net Assets with donor restrictions. True or False?

2.The Excess of Revenues over Expenses focuses on operating activities, while the Increase in Net Assets without Donor Restrictions includes non-operating changes to owners’ equity. True or false?

3. Preferred stock is ownership rights with predetermined dividend payments. True or false?

4. The following assets are in the correct order of liquidity: 1 - accounts receivable, 2- inventory, 3- cash, and 4 - marketable securities? True or False?

5. Retained earnings are the sale of ownership shares to generate capital. True or false?

6. Common stock is generated over time that has not been distributed to owners. True or false?

7. Organizations disclose their accounting policies in the notes to the financial statements because GAAP often allows for different alternative choices, and these decisions might influence how the numbers are presented on the financial statements. True or false?

8. Charity care is reported in the notes for not-for-profit health care organizations, but revenues and expenses are not recorded in the operating statement. True or false?

Answer 1

Answer:

1. False: In a not-for-profit organization, donations received for a particular purpose are recorded as Net Assets with donor restrictions because it was received for a partiucalr purpose. however earnings from such assets can be referred to as Net Assets without donor restrictions. Further Profits and donations with no donor specifications are referred to as Net Assets without donor restrictions because it was not received for a specified purpose.

2. True: Since increase in value of net assets without donor restriction does not derived from the operation of NPO and it is not part of operating income, therefore it can be said that the Increase in Net Assets without Donor Restrictions includes non-operating changes to owners’ equity. In other words this increase is not recurring in nature and does not form part of the operations of NPO.

3. True: It is correct to say the preferred stock is ownership rights with predermined dividend payments because Preferred shareholders have priority over common stockholders when it comes to dividends and these dividends can be fixed or set in terms at the time of issue.

4. False: The correct order of liquidity is as follows:

1. Cash
2. Marketable Securities
3. Accounts Receivables
4. Inventory.

5.False: Retained earnings are earnings that are retianed in the business and not distributed to the stock holders. In other words these are the amount which is generated over time that has not been distributed to owners.

6. False: Common stock is a form of equity and type of security and are the sale of ownership shares to generate capital.