Most people do not realize that there are two sides to the accounting profession. Usually the type of accountant that comes to mind is one that works for a for-profit company. However, in order to ensure compliance and excellent record keeping, one should hire a non profit accountant.
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 specialty is accounting for charitable organizations. This differs from the type of accounting that usually comes to mind, as a charity organization deals with different ways of receiving funds as opposed to a company who earns them by selling a product or service. The procedure for donations is much different than for revenue.
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.
Some charities use the accrual method of accounting; it is preferred by the IRS. However, many use the cash method for a particular reason. Unlike revenue, which can be recorded but not actually recognized until it is earned, charities can record the transactions as they happen. Rarely is there delayed recognition of income. Some use the modified cash method that allows for donations to be recorded immediately but some items such as taxes withheld from paychecks are recorded under the accrual method.
Some donations may have some benefit attached to them, such as those for a charity dinner or membership to the organization. These are not fully deductible as some benefit was received. The only part that can be deducted is the amount paid in excess of the fair value of the benefit received. For example, if someone purchases a plate at a charity dinner, the deductible amount excludes how much the meal is worth. The exception is donations in exchange for very small benefits.
Charities also have particular expense classifications. One classification refers to expenses related to the services offered. The other is supporting activities. These include expenses related to fundraising, management, and membership drives. They are also required to depreciate and capitalize fixed assets, but some have a different treatment than assets of a for-profit company. Items that are part of collections, such as those in museums that when sold a replacement will be purchased, are not considered assets in the traditional sense. However, long-term assets such as buildings are treated similarly to 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 specialty is accounting for charitable organizations. This differs from the type of accounting that usually comes to mind, as a charity organization deals with different ways of receiving funds as opposed to a company who earns them by selling a product or service. The procedure for donations is much different than for revenue.
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.
Some charities use the accrual method of accounting; it is preferred by the IRS. However, many use the cash method for a particular reason. Unlike revenue, which can be recorded but not actually recognized until it is earned, charities can record the transactions as they happen. Rarely is there delayed recognition of income. Some use the modified cash method that allows for donations to be recorded immediately but some items such as taxes withheld from paychecks are recorded under the accrual method.
Some donations may have some benefit attached to them, such as those for a charity dinner or membership to the organization. These are not fully deductible as some benefit was received. The only part that can be deducted is the amount paid in excess of the fair value of the benefit received. For example, if someone purchases a plate at a charity dinner, the deductible amount excludes how much the meal is worth. The exception is donations in exchange for very small benefits.
Charities also have particular expense classifications. One classification refers to expenses related to the services offered. The other is supporting activities. These include expenses related to fundraising, management, and membership drives. They are also required to depreciate and capitalize fixed assets, but some have a different treatment than assets of a for-profit company. Items that are part of collections, such as those in museums that when sold a replacement will be purchased, are not considered assets in the traditional sense. However, long-term assets such as buildings are treated similarly to 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.
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