University of San Carlos

School of Business and Economics

Department of Accountancy

AA 4102 May 26, 2021

Accounting for Not-for-Profit Organization Atty. J.M. Denila, CPA

Questions

1. A nonprofit organization shall prepare a statement of financial position and which of the following financial
statements?
I. Statement of activities
II. Statement of changes in fund balances
III. Statement of Cash flows
a. I, II and III
b. III only
c. II and III
d. I and III

2. The statement of financial position of a nonprofit organization displays the organization’s

a. Assets, liabilities and equity
b. Assets, liabilities and fund balance
c. Excess of assets over liabilities
d. Assets, liabilities and net assets

3. This includes all of the assets of a nonprofit organization that are available for use as authorized by the governing
board of the nonprofit organization.
a. Unrestricted fund
b. Restricted fund
c. Loan fund
d. Plant fund

4. A permanent endowment is one in which

I. The principal must be maintained indefinitely in revenue producing investments and only the
revenue from the investments may be expended.
II. The principal may be expended after the passage of a certain period or the occurrence of an
Event specified by the donor.
a. I only
b. II only
c. Both I and II
d. Neither I or II

5. The “annuity fund” or a nonprofit organization

I. Is established for assets contributed to a nonprofit organization with the stipulation that the
organization shall pay specified fixed amounts periodically to designated recipients for a
specified period of time.
II. Is used to account for assets contributed to the nonprofit organization with the stipulation that
the organization shall make stipulated payments to a named beneficiary but only the income
on the fund is paid to the beneficiary.
a. I only
b. II only
c. Both I and II
d. Neither I nor II

6. Which of the following conditions is required for the recognition of contributed services in a statement of
activities?
I. The contributed services create or enhance nonfinancial assets.

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 II. The contributed services require specialized skills, are provided by individuals possessing those
skills, and would typically need to be purchased if not provided by donation.
a. Both I and II
b. Either I or II
c. I only
d. Neither I nor II

7. The net assets of a nonprofit organization is a statement of financial position are classified as
a. Unrestricted and temporarily restricted
b. Temporarily restricted and permanently restricted
c. Unrestricted and temporarily restricted
d. Unrestricted , temporarily restricted and permanently restricted

8. The “contractual adjustment account” of a nonprofit hospital is

a. An expense account
b. A revenue offset account
c. A loss account
d. An asset account

9. A nonprofit private elementary school occupies its school building rent-free as permitted by the
building owner. The existence of rent-free facilities is recognized in the school’s Unrestricted Fund
as
a. Financial aid expense and other operating support
b. Rent expense and an increase in fund balance
c. Rent expense and contributions revenue
d. An item requiring disclosure in the note to the financial statements.

10. How is charity care accounted for in the financial statements of a nonprofit health care
organization?
a. Patient Service Revenue
b. Bad Debt Expense
c. Separate component of revenue
d. Not included in the Financial Statement

11. A storm broke the glass windows in the building of a religious organization. A member of the
organization replaced the windows at no charge. In the statement of activities of the religious
organization, the breakage and replacement of the windows should
a. Not be reported
b. Be reported by note disclosure only
c. Be reported as an increase in both expenses and contributions
d. Be reported as an increase in both net assets and contributions

12. How are nonrefundable advance fees representing payments for future services accounted for by a
nonprofit continuing care organization?
a. As revenue
b. As a liability
c. As other financing source
d. In a trust fund

13. Philippine Museum has both regular and term endowment. On the museum’s statement of
financial position, how should the net assets of each type of endowment be reported?
a. Term endowment as temporarily restricted and regular endowment as permanently
restricted
b. Term endowment as permanently restricted and regular endowment as termporarily
restricted
c. Both term and regular endowments as permanently restricted
d. Both term and regular endowments as temporarily restricted

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14. A prominent art collector donated an art collection to a private nonprofit museum with the
stipulation that the art collection be shown to the public, that it should be preserved and not be
sold. On the date of donation, what was the effect of the donation on the museum’s financial
statements?
a. Temporarily restricted net assets increased
b. Unrestricted net assets increased
c. Permanently restricted net assets increased
d. No effects on net assets

15. Which of the following would result to reclassifications of net assets of a nonprofit organization?
I. Expiration of donor- imposed condition
II. Expiration of donor-imposed restriction
a. I only
b. II only
c. Both I and II
d. Neither I nor II

16. A voluntary health and welfare organization received a contribution from a donor in 2018. The
donor did not specify any use restrictions but the donor specified that the donation should be
used in 2019. The governing board of the organization spent the contribution in 2019 for fund
raising expenses. For the year ended December 31, 2018, the organization shall report the
contribution in its
a. Statement of financial position as deferred revenue
b. Statement of activities as unrestricted revenue
c. Statement of financial position as increase in fund balance
d. Statement of activities as temporarily restricted

17. Depending on the extent of discretion that the nonprofit organization has over the use or
subsequent disposition of assets, gifts in kind may be treated as
a. Agency transaction only
b. Contribution only
c. Either agency transaction or contribution
d. Neither agency transaction nor contribution

18. For a private nonprofit organization, when is a donor’s conditional promise to give considered
unconditional?
a. Only when the condition is substantially met.
b. When the possibility that the condition will not be met is remote.
c. When the conditional promise is made.
d. When the cash or other asset promised is received.
19. During the current year-end, a foundation received the following contributed services:
I. A reputable law firm contributed services which involve advice related to the foundation’s
regular endowments
II. Senior citizens participated in a telethon to raise money for a new music building.
Which of these contributed services should be included in unrestricted revenue in the foundation’s statement of
activities for the current year-end?
a. I only
b. II only
c. Both I and II
d. Neither I nor II

20. Which of the following private nonprofit entities is required to report expenses both by function
and by natural classification?
a. Hospital
b. University
c. Voluntary health and welfare organization

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 d. Performing arts organization

21. A nonprofit organization receives an asset for which it has little or no discretion over the use of the
asset. The organization should report the asset as
a. Contribution
b. Agency transaction
c. Conditional transfer
d. Either contribution or agency transaction

22. Which of the following transaction would result in an increase in unrestricted net assets for the
year ended December 31, 2018?
I. A private nonprofit hospital earned interest on investments that board-designated.
II. A private nonprofit organization received unconditional promises to give which will not be
received until the beginning of 2019. The donors placed no restrictions on their donations.
a. I only
b. II only
c. Both I and II
d. Neither I nor II

23. Unconditional promises to give that include promises of payment due in future periods (next year
or later) are reported as:
a. unrestricted revenues
b. a memorandum- until the year of the promised payment
c. deferred revenue until payment is received
d. restricted revenues

24. Not-for-profit organization’s report unconditional promises to give that will be collected in future at:
a. the present value of the amounts expected to be collected
b. net realizable value
c. the gross amounts that are pledged
d. none of the above

25. Which of the following statements are not required for voluntary health and welfare organizations?
a. statement of financial position
b. statement of activities
c. statement of functional expenses
d. statement of changes in net assets

26. Which of the following not-for-profit organizations is least likely to record depreciation expense on its capital
asset?
a. museum
b. church
c. hospital
d. university

27. Which of the following is (are) treated as expense (s) by not-for-profit colleges and universities?
a. Tuition waivers and student aid
b. Tuition waivers and estimated bad debts
c. Estimated bad debts and student aid
d. Tuition waivers, student aid and estimated bad debts

28. A university library received a donation of rare books from an alumnus. The university would record the gift as:
a. a restricted revenue
b. an endowment asset
c. a memorandum only
d. an exchange transaction

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29. Not-for-profit college and university student unions, dormitories and residence halls are considered:
a. educational and general services
b. auxiliary enterprises
c. independent operation
d. none of the above

30. Voluntary health and welfare organization’s must report expenses classified by:
a. Restriction and function
b. Function and natural classification
c. Restriction and natural classification
d. Restriction, function and natural classification

31. Which fund may account for a university’s internally designated fund, the income from which will be used for a
specific purpose?
a. Endowment fund
b. Term endowment fund
c. Quasi-endowment fund
d. Restricted current fund

32. Which of the following should be included in the current funds revenues of a public university?
Tuition Waivers Unrestricted Bequests
a. Yes No
b. Yes Yes
c. No Yes
d. No No

33. Tuition waivers for which there is no intention of collection from the student should be classified by a non-for-
profit university as:
Revenue Expenditures
a. No No
b. No Yes
c. Yes Yes
d. Yes No

34. On December 31, 2019, the Board of Trustees of Cebu State College, a private not-for-profit college, designated
P8,000,000 of unrestricted net assets for the construction of a laboratory building.

What effect does this designation have on the College’s unrestricted and temporarily restricted net assets which are
reported on the College’s statement of financial position at December 31, 2019?
Unrestricted Temporarily Restricted
Net Assets
a. No effect Increase
b. Decrease Increase
c. Decrease No effect
d. No effect No effect

35. For a private, not-for-profit organization, when is a donor’s conditional promise to give considered to be
unconditional?
a. Only when the condition is met
b. When the possibility that the condition will not be met is remote
c. When the conditional promise is made
d. When the cash on other assets promised are received

- Nothing Follows -

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