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Financial Statements of Not-for-Profit Organizations

Financial statements of not-for-profit organizations mean that financial statements which are made by organizations whose aim is not to earn and distribute the profit. It means, these organizations do not involve in business activities but these organisations use all the surplus from their activities in achieving their Goal. Because, these organisations operate with the money of donation or sponsorship, so they have to keep accounts and show their financial results in the form of financial statements.

I am also operating many not-for-profit organisations whose aim is to do social welfare activities. Recently, I got some donation from my UK and Indian donors. So, I maintain my all Not-for-profit organizations' account. I also make financial statements of my Not-for-profit organisations because any donor can check the uses of their money and my financial statements can clear his all doubts. If any Not-for-Profit Organization do not make financial statements, it means, its activists are cheating with donors' donations and use donation money for personal benefits. If you are donor, then before donation,  please check the financial statements of Not-for-profit Organisation from expert accountant. Only expert accountant or auditor can audit the financial statements and can bring many unknown loopholes.

Here, I am analysis to Big Not-for Profit Organisation's  financial Statement

 Financial Statements 2010 of Wikipedia 

Actually Wikipedia is just domain name. Real Not-for-profit organisation which is back of this website is Wikimedia whose aim is to store whole knowledge on public domain  for everybody. It has also other projects also. Today, I have studied its 11 pages financial statements 2010 and 2009 PDF File in which it has included balance sheet, statement of activities, cash flow statement and Notes to financial statements.

1st Balance Sheet of Wikimedia Foundation, Inc. 

Above is simple balance sheet of this organisation in which it shows its total assets and liabilities. But some items are very interesting to know.

(A) Contribution Receivable 

As per per the balance sheet of this NPO, major part of total assets is current assets. One of its current asset is contribution receivable. In 2009, there were 1.3 M $ as contribution receivables and now are 0.5 M $. Actually, some of Wikipedia's contributors are its huge fan and send some money gift for its promotion. Because they are providing these gifts from many years. So, Wikipedia's accountants know from whom we got gift and from whom we did not get gift at the end of year. Now, that contribution which is receivable is outstanding income of Wikipedia and Wikipedia has shown it as current asset. If we study its statement of activity deeply, we found that same contribution receivables are included in its contribution.

By what it has decreased from 2009. Answer is simple, some contributors have paid their contribution dues to Wikipedia. Now, how   is  Wikimedia calculating two years ago pending contribution. Answer is its Wikipedia is the sea of knowledge and every second something is updating whose knowledge is to its management. Wikimedia is adopting present value rule for showing this current asset. As per the US Treasury rate, fair value of contribution of receivable has been calculated.

(B) Account Receivables 

This NPO has also shown account receivables $ 0.35 M on  June 2010. It means Wikimedia  has some of  advance users who have power to get live feed of its websites. Just like, you can see my website's live feed right side for RSS icon. But Wikimedia gets fees for this. Some of users, organisation has to get fees, so, this is the asset of this organisation. But due to organisation is NOP, so it can not charge interest on it otherwise, due amount and interest will both be the asset of any company.

(C) Deferred Revenue 

Deferred revenue are $ 0.13 M. These are the advance fees which Wikimedia corporation got from users for showing live feed for its websites. Because it does not provide services and got money, so it has been shown in liability side.

(D) Net Assets 

For its balance sheet, we come to know that it has divided its net assets into two part.

i)  Unrestricted Assets 

It means,  maximum donation and other assets which has received in cash or in-kind,  are unrestricted. Organization can use any part of its mission.

(F) Temporary Restricted Assets 

Money and current assets can be used on some restriction. It means specific cash can be used for specific part of mission of organisation.

2nd Statement of Activities 

Statement of activities is just like income and expenditure statement of Wikimedia. Everything in it is simple to understand. But as user of Wikipedia, I am interested to know the total operating cost for operating Wikipedia  website. $10.2 millions are its total expenditures and its total revenue is $ 17.9 million. It means net surplus of  $ 7.7 million which is still very very  low from for-profit organisation like Google other. So, we have to come forward to donate to this great and educational not-for-profit organisation.

3rd Cash Flow Statement 

For calculating cash from operation, organisation has adjusted donation of common stock and donation of equipment because both are non cash revenue part of organisation. For knowing net cash flow from operation, we need to adjust non-cash operating items. When it has made its statement of activities, all outstanding expenses are added in expenses, it means surplus on accrual basis. Now as per cash basis,  it has deducted from net surplus. When it has made its statement of activities, all advance but cash expenses are deducted and now we will deduct all these advance expenses. Like this some advance and outstanding incomes have been adjusted. All other things of cash flow of this organisation is easy to understand.

Related : Financial Analysis of RBI 


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Accounting Education: Financial Statements of Not-for-Profit Organizations
Financial Statements of Not-for-Profit Organizations
Accounting Education
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