Question

Many of us make pledges such as to NPR, or other organizations (religious groups, social organizations, etc...) When a not-for-profit (NFP) receives these they must account for them. Sometimes though, they may have a "gift" for making a donation. And this may have different consequences. Think of an NFP that you know of. How do they raise money? Are these pledges/contributions? What determines how they are recorded? How do these differ from exchange transactions? In both cases, when is revenue recorded?

Answer 1

Here NFP = non for profits

Here we solve each question one by one

1. The non for profita raise money through following sources

A. NFP's have some fixed donor that they will compulsorily donate some fixed amount for every regular time intervals.

B. They collect donations from more rich and more helpful persons in our society everyday.

C. They do small bussiness which does not have large profits and eventhough less margin available they use that profits for NFP

D. they conduct some awareness campaigns with popular stars like actors and sports person and they collect some nominal amount from people who come to see those stars.

E. If at all the NFP is a big organization the government will help by giving some funds .

2. They are uses mostly contributions rather than pledges.

Contributions will be the give more liquid cash than pledges so the NFP tprefer contributions rather than pledges.

3. They are recorded as donations only. They don't have equity to present in the balance sheet they present the net assets and liabilities and carry forward the those net assets to the next year.

4. In both the cases the revenue is recoded as follows :-

In contributions the revenue is recorded at the time of receipt of contribution and donation

But in the case of the pledges the revenue is recorded at the time of completion of pledging process.

These are all the points required to solve the given questions

I hope, all the above mentioned points are useful and helpful to you.

Thank you.