Bookkeeping for Nonprofits E-Book

Murray Dropkin

• Herausgeber: John Wiley & Sons
• Kategorie: Fachliteratur
• Sprache: Englisch

Seitenzahl: 377

Veröffentlichungsjahr: 2005

Beschreibung

BOOKKEEPING FOR NONPROFITS Bookkeeping for Nonprofits is a hands-on guide that offers nonprofit leaders, managers, and staff the tools they need to create and maintain a complete and accurate set of accounting records. This much-needed resource provides those with little or no bookkeeping experience with practical advice in a highly accessible format. Written by Murray Dropkin and Jim Halpin, Bookkeeping for Nonprofits is a step-by-step introduction to keeping accounting records, which form the foundation for a nonprofit organization's financial reports, tax returns, budgets, cash forecasts, and grant proposals. Using this volume as a guide, nonprofit leaders and staff will be able to set up books with or without accounting software and ensure that the records meet the needs of their organization. Bookkeeping for Nonprofits is a comprehensive resource that * Discusses how transactions provide day-to-day information for tracking cash balances and cash requirements * Shows how transactions provide information to management and the board of directors for budgeting and other essential tasks * Explains basic bookkeeping concepts, such as the accounting equation, the chart of accounts, and income and expense tracking * Guides readers through the nuts and bolts of recording a transaction * Provides an overview of alternative recordkeeping methodologies and how to choose among them Designed to be easy to use, the book is filled with illustrations and checklists. "Bookkeeping for Nonprofits is the remarkable new guide for a new generation of accounting challenges bookkeepers face every day." --Frances Hesselbein, chairman and founding president, Leader to Leader Institute "Bookkeeping for Nonprofits provides a rare combination of consummate professionalism and clear, accessible writing. Underlying the wealth of technical information lies a great deal of wisdom. The authors have found a way to translate their enormous, on-the-ground experience into usable, actionable policies, procedures, and practices. It is a book that gives all you need to create a fiscally responsible agency with the bonus of helping you become a better manager and a wiser person." --Peter Block, business consultant and author of Flawless Consulting and The Empowered Manager "Bookkeeping for Nonprofits provides an excellent understanding of the practical application of bookkeeping in the real work environment." --Ron Werthman, vice president, finance/treasurer and CFO, Johns Hopkins Health System, The Johns Hopkins Hospital "This is a wonderful book that every bookkeeper in a nonprofit organization should have." --Eusebio David, fiscal director, Federation of Multicultural Programs, Inc.

Leseprobe

Contents

Title

Copyright

Dedication

List of Exhibits and Checklists

Preface

Acknowledgments

The authors

Part One: Understanding the Importance of Good Bookkeeping

Chapter 1: Overview of the Bookkeeping Function

Users of the Information

Bookkeeping, Accounting, Auditing: Who Does What?

The Nonprofit World

Terminology

Summary

Chapter 2: The Accounting Equation

Two Views

Posting Transactions

Types of Accounts

The Accounting Equation

Confusing Terminology

Summary

Chapter 3: The Chart of Accounts

Traditional Order

Asset Accounts

Liability Accounts

Account Numbering

Summary

Part Two: Recording Transactions Correctly the First Time

Chapter 4: Income

The Basic Entry

Receivable Tracking

Program Service Income (Fees for Service)

Income from the Sale of Inventory

Income Support from Contributions

Income from Grants

Interest, Dividend, and Royalty Income

Income from Membership Dues

Income from Special Events

Real Estate and Rental Income

Income from the Sale of Assets

Debt-Financed Revenue

Internal Control Considerations

Summary

Chapter 5: Cash Receipts

Sources of Cash

Form of Receipts

Controlling the Cash Receipt Process

Collections

Summary

Chapter 6: Payroll

Confidentiality

Payroll Bank Account

Direct Deposit

Human Resources

Employment Process

The Payroll Process

Expense Reimbursement

Statutory Deductions

Elective Deductions

Recording the Payroll Transaction

Payroll Tax Reporting

Highly Compensated Employees

Qualified Transportation Fringe Benefit

Summary

Chapter 7: Purchases

Vendors

Purchase Order System

Unprocessed Vendor Invoice File

Invoice Posting

No Invoice Number

Vendor Credits

Vendor Statements

Other Issues

IRS Form 1099

Summary

Chapter 8: Cash Disbursements

The Basic Entry

Accounts Payable

Manually Written Checks

Void Checks

Daily Check Register

Bank Reconciliation

Petty Cash

Summary

Chapter 9: General Journal Entries

General Journal

Recurring Entries

Accruals and Reversals

Materiality

Documentation

Approvals

Summary

Chapter 10: The Month-End Close and Account Analysis

Interim Periods

General Ledger Posting

Account Analysis

Bank Reconciliation

Control Accounts

Prepaid Expenses

Fixed Assets (Land, Buildings, and Equipment)

Marketable Securities

Accrued Expenses

Notes Payable

Net Assets

Summary

Chapter 11: Allocating Costs

Allocation Challenges

Form 990 Allocations

Allocation Methods

Indirect Cost Allocation

Summary

Part Three: Putting It All Together

Chapter 12: Financial Statements

Level of Assurance

Financial Statement Providing the Snapshot View

Working Capital

Financial Statements Providing the History View

Other Financial Statements

Chapter 13: Operating Budgets

Operating Budgets: Basic Concepts

Overview of Budgeting

Budgeting Strategies

Budgeting Goals, Guidelines, Policies, and Procedures

Summary

Chapter 14: Cash Flow Reporting, Forecasting, and Management

Fundamentals of Cash Flow Forecasting

Cash Flow Forecasting Based on the Operating Budget

Cash Flow Reporting, Monitoring, and Analysis

Summary

Chapter 15: Conclusion

Communication/Collaboration

Innovation in Budgeting

Emphasis on Cash Flow

Continuous Training

Professional Financial Consulting

Resource A: Good Financial Management

Resource B: Setting Up Your Files

Resource C: Alternative Recordkeeping Approaches

Resource D: Managing Your Computer System: Security, Backups, and Other Considerations

Resource E: Organization and Tax Issues of Tax-Exempt Organizations

Resource F: Checklist: Financial Monitoring of Government Grants

Resource G: Excerpts from OMB Circular A-122

Resource H: Web Site Resources

Resource I: Bibliography

Readers are invited to view and download supplementary materials for Bookkeeping for Nonprofits: A Step-by-Step Guide to Nonprofit Accounting.

The supplementary materials are available FREE on-line.

If you would like to download and print out an electronic copy of the supplementary materials, please visit www.josseybass.com/go/bookkeepingfornonprofits.

Thank you,

Murray Dropkin and James Halpin

Previous books by Murray Dropkin include:

The Budget-Building Book for Nonprofits: A Step-by-Step Guide for Managers and Boards,Murray Dropkin and Bill LaTouche (1998)

The Cash Flow Management Book for Nonprofits: A Step-by-Step Guide for Managers, Consultants, and Boards,Murray Dropkin and Allyson Hayden (2001)

Copyright © 2005 by John Wiley & Sons, Inc. All rights reserved.

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Library of Congress Cataloging-in-Publication Data

Dropkin, Murray.

Bookkeeping for nonprofits: a step-by-step guide to nonprofit accounting/ Murray Dropkin, James Halpin.

p. cm.

Includes bibliographical references.

ISBN-13 978-0-7879-8022-6 (alk. paper)

ISBN-10 0-7879-7540-0 (alk. paper)

1. Nonprofit organizations—Accounting. I. Halpin, James, date.

II. Title.

HF5686.N56D76 2005

657’.2—dc22

2005003106

List of Exhibits and Checklists

Chapter One

Exhibit 1.1: Snapshot Report from Bookkeeper to Management

Chapter Three

Exhibit 3.1: Modified Unified Chart of Accounts—Assets

Exhibit 3.2: Modified Unified Chart of Accounts—Liabilities

Exhibit 3.3: Modified Unified Chart of Accounts—Net Assets

Exhibit 3.4: Modified Unified Chart of Accounts—Contributions, Support (Revenue)

Exhibit 3.5: Modified Unified Chart of Accounts—Expenses

Part Two

Exhibit II.1: Example Entry Created by Cash Receipts Software

Chapter Four

Exhibit 4.1: Posting to Record Co-Payment and Bill Client for Services

Exhibit 4.2: Posting to Record Cash Sale of an Inventory Item

Exhibit 4.3: Posting to Record the Cost of a Sale of an Inventory Item

Exhibit 4.4: Posting to Record a Sales Transaction

Exhibit 4.5: Posting to Record Payment by Customer

Exhibit 4.6: Posting to Record Receipt of Contribution

Exhibit 4.7: Journal Entry to Record an Unrestricted Grant Award

Exhibit 4.8: Posting to Record Receipt of Grant Payment

Exhibit 4.9: Posting to Record Receipt of Grant Payment When Requirement Not Met

Exhibit 4.10: Journal Entry to Record Savings Account Interest

Exhibit 4.11: Posting to Record Receipt of Royalty Payment

Exhibit 4.12: Posting to Record Receipt of Unbilled Membership Dues

Exhibit 4.13: Journal Entry to Record the Receipt of Rent Security Deposit

Exhibit 4.14: Posting to Record Receipt of Rent for Two Months

Exhibit 4.15: Journal Entry to Reclassify Deferred Rent to Rental Income

Exhibit 4.16: Posting to Record the Sale of a Building

Chapter Five

Exhibit 5.1: Posting to Record the Receipt of an Open A/R Item

Exhibit 5.2: Journal Entry to Record Savings Account Interest

Exhibit 5.3: Posting to Record Receipt of Insurance Claim Proceeds

Exhibit 5.4: Posting to Record Supplier Refund for Existing Credit Memo

Exhibit 5.5: Posting to Record the Return of a Deposit

Exhibit 5.6: Posting to Record the Transfer of Funds

Exhibit 5.7: Posting to Record the Receipt of an Unbilled Contribution by Credit Card

Checklist 5.1: Internal Control Checklist for Cash Receipts

Exhibit 5.8: Posting to Write-Off a Bad Debt

Chapter Six

Exhibit 6.1: Posting to Establish a Payroll Checking Account

Exhibit 6.2: Posting to Transfer Net Pay to Payroll Account

Exhibit 6.3: Journal Entry to Record the Weekly Payroll (Simplified)

Exhibit 6.4: Posting to Record the Weekly Payroll (Simplified)

Exhibit 6.5: Posting to Record the Payroll Tax Payment

Exhibit 6.6: Posting to Record the Payroll with Travel Reimbursement (Simplified)

Exhibit 6.7: Posting to Record the Payroll (Detailed)

Exhibit 6.8: Federal Payroll Tax Forms

Exhibit 6.9: Calendar Used to Calculate a Payroll Accrual

Exhibit 6.10: Journal Entry to Record the Payroll Accrual

Exhibit 6.11: Journal Entry to Reverse the Payroll Accrual

Chapter Seven

Exhibit 7.1: Posting to Record a Vendor Invoice

Exhibit 7.2: Posting to Record a Vendor Credit Memo

Chapter Eight

Exhibit 8.1: Posting to Record the Printing of A/P Checks in Payment of Open Items

Exhibit 8.2: Posting to Record a Manual Check in Payment of an Unrecorded Invoice

Checklist 8.1: Internal Control Checklist for Cash Disbursements

Exhibit 8.3: Posting to Establish a Petty Cash Fund

Exhibit 8.4: Posting to Record the Petty Cash Fund Reimbursement

Chapter Nine

Exhibit 9.1: Journal Entry to Accrue Revenue

Exhibit 9.2: Journal Entry to Reverse the Revenue Accrual

Exhibit 9.3: Calendar to Calculate a Payroll Accrual

Exhibit 9.4: Journal Entry to Record the Payroll Accrual

Exhibit 9.5: Journal Entry to Reverse the Payroll Accrual

Chapter Ten

Exhibit 10.1: Sample Bank Reconciliation

Checklist 10.1: Internal Control Checklist for Bank Accounts

Exhibit 10.2: Journal Entry to Write-Off One Month’s Insurance Premium

Exhibit 10.3: Journal Entry to Accrue One Month’s Real Estate Tax

Exhibit 10.4: Entries to Record the Payment of the Quarterly Real Estate Tax Bill, Reversing an Accrual and Writing-Off the Prepaid Portion

Exhibit 10.5: Journal Entry to Write-Off One Month’s Prepaid Real Estate Tax

Exhibit 10.6: Posting to Record a Temporarily Restricted Contribution

Exhibit 10.7: Posting to Record Various Hotline-Related Expenses

Exhibit 10.8: Journal Entry to Reclassify a Temporarily Restricted Net Asset

Chapter Eleven

Exhibit 11.1: Sample Cost Allocation Methods

Exhibit 11.2: Actual Allocation Example

Exhibit 11.3: Fixed Allocation Method Example

Exhibit 11.4: Example Allocation Based on a Ratio of Income

Chapter Twelve

Exhibit 12.1: Sample Statement of Financial Position

Exhibit 12.2: Sample Statement of Support, Revenue, and Expense

Exhibit 12.3: Sample Statement of Cash Flows

Exhibit 12.4: Sample Statement of Functional Expenses

Chapter Thirteen

Exhibit 13.1: Worksheet for Setting Annual Top-Down Organizational Outcome Goals to Guide the Development of Draft Program/Unit Budgets

Exhibit 13.2: Worksheet for Setting Annual Top-Down Income and Expense Targets to Guide Development of Draft Program/Unit Budgets

Exhibit 13.3: Worksheet for Program/Unit Heads to Prepare Three Draft Budgets

Exhibit 13.4: Worksheet for Zero-Based Budgeting

Chapter Fourteen

Exhibit 14.1: Summary of Conversion from Operating Budget to Cash Flow Forecast

Exhibit 14.2: Worksheet to Prepare an Annual Cash Forecast

Exhibit 14.3: Daily Cash Flow Forecast

Exhibit 14.4: Weekly Cash Flow Forecast

Exhibit 14.5: Quarterly Cash Flow Forecast

Exhibit 14.6: Annual Cash Flow Forecast

Exhibit 14.7: Forecasted-Versus-Actual Cash Flow Report

Exhibit 14.8: Analysis of Key Cash Flow Variances Report

Exhibit 14.9: Historical Cash Flow Variances Analysis

Resource B

Checklist B.1: Insurance Coverage Checklist

Exhibit B.1: Survey of Staff’s Computer Activity

This book is dedicated to the bookkeepers who inspired this book—all those who helped train me as a bookkeeper (on my way to becoming an accountant and CPA)—and to the profession of bookkeeping itself.

Bookkeepers are the backbone of a good nonprofit organization. They keep things going. They pay the staff accurately, they keep vendors happy, and they watch every disbursement to make sure the organization is getting value. They file reports required by funding sources on time. They understand what the organization’s mission is.

When you graduate college with an accounting degree, you know a lot of theory but not a lot about bookkeeping. Part of the reason for this phenomenon relates to human beings creating a great number of different ways to record transactions. Each client I visited in the early stages of my career maintained varying quality of records from excellent to nearly non-existent.

The one constant was that the bookkeeper was trying valiantly, sometimes with little or no training or supervision or assistance, to keep the records straight. If the records were not correct, the same vendor could get paid twice—or perhaps not at all—or checks could bounce if the cash records were wrong.

I was sent to a very hot factory one day to do a payroll because the bookkeeper was ill. The payroll was piece-work payroll, where the staff is paid a certain amount for each piece of work completed. Virtually the entire shop’s staff consisted of non-English-speaking immigrants. Being a neophyte bookkeeper I made several mistakes in calculating the amount of the payroll check due to several workers. Within five minutes of the checks being distributed, three employees came into the bookkeeper’s office waving official government payroll tax tables at me to show me I was unable to read a withholding table correctly. My understanding of how difficult it was to be a bookkeeper really increased that day. My respect for bookkeepers went up enormously after that experience. It was very difficult to prepare accurate bookkeeping records, especially under pressure.

Bookkeepers taught me what a recurring journal entry is and what an accrual is and what a reversing entry is. I remember one bookkeeper lecturing me on the importance of making sure that all operations of the organization were properly insured. Time and time again the glue that held the entity together was the bookkeeper, who seemed to know everything about what was going on. The bookkeeper would plot and scheme to conserve cash so a payroll was never missed. A good bookkeeper had the guts to tell the boss no if an improper transaction was being contemplated.

I hope this book helps those individuals working as bookkeepers now to understand better their roles within an organization. I hope this book will encourage bookkeepers to learn more and improve their skills so that they can become better bookkeepers and (if they so desire) continue growing in their professional career to achieve the highest possible goals. Based on my experience, by starting in a bookkeeper position it is possible to grow professionally to a more senior career position—all it takes is hard work and perseverance. I sent drafts of this book to eighteen different reviewers for an overall review of its contents. Most of the reviewers were bookkeepers before they became accountants, controllers, treasurers, directors of finance, and CPAs. Bookkeepers and their supervisors, working together, can create outstanding staff development opportunities. I truly hope this book, written for bookkeepers and based on the input of former bookkeepers (wearing their new hats), will be useful to members of that profession as they perform their current job and as they work their way up the organizational and professional ladder. I wish all of you bookkeepers the best of luck in your current and future career.

March 2005

Murray Dropkin

Brooklyn, New York

This is dedicated to Janny.

March 2005

James Halpin

Edison, New Jersey

Preface

We have been working with nonprofit organizations for decades. As far back as 1965, we saw how difficult the financial record-keeping challenge was for a nonprofit organization. In one consulting engagement from that year, the executive director of the organization was a poet and educator. His scholarship had made him a relatively famous individual in literary circles. The organization he headed was a small nonprofit with an annual income under $100,000. He was both executive director and bookkeeper and would ask interesting, complex questions about how best to keep the books. His knowledge of literature far exceeded his bookkeeping skills, and it was a challenge for him to keep the organization’s financial records properly and to prepare accurate financial statements and tax filings to satisfy the government and the funding source.