More Nonprofit finance lingo …What are the diff acctg systems- fixed assets & depreciation
Types of Nonprofit accounting systems:
Accrual–items incurred during an accounting period in which payment is postponed i.e. accrued salaries (sick leave, vacation …), and accrued rent payable (paid in advance as deposits)
Accrual is an accounting method that measures the performance and position of a company by recognizing economic events regardless of when cash transactions occur. The general idea is that economic events are recognized by matching revenues to expenses (the matching principle) at the time in which the transaction occurs rather than when payment is made (or received). This method allows the current cash inflows/outflows to be combined with future expected cash inflows/outflows to give a more accurate picture of a company's current financial condition.
Cash– The receipt and disbursement of dollars/money, no postponements, no monies deferred, cash in – cash out
Only record income when you actually receive it in the door. So, if you receive a pledge letter from a donor or foundation, you only count the money when you actually receive the check. The same thing with expenses, you only record expenses when you actually write the check to the vendor- not when you receive the bill, it sounds like common sense right? Why wouldn't everyone use this method? Well, not all nonprofits use this method because it can distort your revenue and expenses.
Read more: http://nonprofitsos.blogspot.com/2008/08/nonprofit-accounting-cash-vs-accrual.html
Fixed assets & what is depreciation?
Fixed assets – the net worth of the physical items a corporation owns which cannot easily be converted to cash. Like what? Property, building, improvements and equipment
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