Many people are not aware that there are different types of accountants. Usually when one thinks of this profession, it is in relation to companies who operate with the intent to earn a profit. However, one needs a non profit accountant to do the books for a charitable organization.
An accountant has earned at minimum a Bachelor's degree in accounting. Those that run their own firms are usually CPAs, however, their employees do not have to be. Some students work in accounting firms as interns while getting their degrees. Most focus on one specialty, such as tax or investing.
One of these specialties is accounting for non-profit companies. This is much different from the usual type of accounting that is referred to, as charities receive funds in the form of donations as opposed to selling a service or product. The procedures for recording donations is different than that for revenue, which may have delayed recognition.
Most income received by a charitable organization is in the form of donations. These are usually a tax write off for the donor, so they need to be handled in a particular manner. Cash contributions are pretty straightforward, but some types of contributions are a little trickier to account for.
There are a few charities who use the accrual method that is preferred by the Internal Revenue Service. Most, however, use the cash method. This recognizes cash as it is received and expenses as they are paid. Other organizations may use the modified cash method, this records donations the same as the cash method but allows for items such as taxes withheld from employee's paychecks to be handled using the accrual basis. This is keeping with the preference for recognizing transactions in the proper accounting period.
Donations that are actually membership dues or occur in relation to a special event may not be fully deductible. The difference between the fair value of what was received and the total paid is all that is allowed as a deduction. If a charity hosts a dinner, the deductible amount excludes the fair value of the dinner. The one exception is donations in return for a negligible benefit.
A charity will also have certain expense classifications. One is related to the services that are offered. The other is in relation to supporting activities. These can include expenses in relation to management, fundraising, or management drives. They must also capitalize and depreciate long-term assets although some require different treatment. Things such as museum collections that are replaced when sold are not treated as assets in the traditional way. Fixed assets such as buildings receive a similar treatment to those of a for-profit company.
Any non profit accountant will be well practiced in the procedures for keeping books for a charity. It is necessary to locate a firm that specializes in this field. There are both FASB and IRS rules and guidelines that must be followed. The peace of mind that hiring an accountant brings cannot be understated.
An accountant has earned at minimum a Bachelor's degree in accounting. Those that run their own firms are usually CPAs, however, their employees do not have to be. Some students work in accounting firms as interns while getting their degrees. Most focus on one specialty, such as tax or investing.
One of these specialties is accounting for non-profit companies. This is much different from the usual type of accounting that is referred to, as charities receive funds in the form of donations as opposed to selling a service or product. The procedures for recording donations is different than that for revenue, which may have delayed recognition.
Most income received by a charitable organization is in the form of donations. These are usually a tax write off for the donor, so they need to be handled in a particular manner. Cash contributions are pretty straightforward, but some types of contributions are a little trickier to account for.
There are a few charities who use the accrual method that is preferred by the Internal Revenue Service. Most, however, use the cash method. This recognizes cash as it is received and expenses as they are paid. Other organizations may use the modified cash method, this records donations the same as the cash method but allows for items such as taxes withheld from employee's paychecks to be handled using the accrual basis. This is keeping with the preference for recognizing transactions in the proper accounting period.
Donations that are actually membership dues or occur in relation to a special event may not be fully deductible. The difference between the fair value of what was received and the total paid is all that is allowed as a deduction. If a charity hosts a dinner, the deductible amount excludes the fair value of the dinner. The one exception is donations in return for a negligible benefit.
A charity will also have certain expense classifications. One is related to the services that are offered. The other is in relation to supporting activities. These can include expenses in relation to management, fundraising, or management drives. They must also capitalize and depreciate long-term assets although some require different treatment. Things such as museum collections that are replaced when sold are not treated as assets in the traditional way. Fixed assets such as buildings receive a similar treatment to those of a for-profit company.
Any non profit accountant will be well practiced in the procedures for keeping books for a charity. It is necessary to locate a firm that specializes in this field. There are both FASB and IRS rules and guidelines that must be followed. The peace of mind that hiring an accountant brings cannot be understated.
About the Author:
You can visit the website arizonastatetaxpreparation.com for more helpful information about What Is A Non Profit Accountant?
No comments:
Post a Comment