It is not always apparent that there are two sides to accounting. Most people think of accountants that work for for-profit organizations, if they think about them at all. However, charities need a particular type of record keeping in order to be in compliance and for this they need a non profit accountant.
Any accountant will have earned a Bachelor's degree in accounting. Many who own their own practices are CPAs although their employees need not be. Most specialize in some particular type of work, as keeping track of the regulations and paperwork is easier when dealing with only one specialty, such as income tax.
One of these specialties is accounting for non-profit companies. This is much different from the usual type of accounting that is referred to, as charities receive funds in the form of donations as opposed to selling a service or product. The procedures for recording donations is different than that for revenue, which may have delayed recognition.
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.
It is worth mentioning that although some charities utilize the accrual method, which is preferred by the IRS, most use the cash method of accounting. This means that the money is recorded as it is received and expenses are recorded as they occur. Some organizations choose to use a modified cash basis, which allows them to record donations at the time they occur but allows them to record items such as tax withheld from employees using the accrual method.
Donations that occur in tandem with a special event or are considered membership dues are not completely deductible by the donor. The only portion that can be used as a deduction is the difference between the value of the service received and the total amount paid. For example, if an organization holds a charity dinner, the amount that is deductible does not include the value of the meal. This does exclude donations that come with extremely small benefits.
These organizations also have certain classifications for expenses. One is related to the services offered. The other is related to the supporting activities of the organization. These can include fundraising drives, management, and searches for new members. Charities must also depreciate long-term assets but some may be treated differently. A building can be depreciate the same as one would for a for-profit company, however, items such as collections in a museum that would be replaced when sold are not treated in the usual way.
A non profit accountant will be well versed in the proper procedures for this type of record keeping. It is very important to locate one that works only for charities. They need to be familiar with the various FASB guidelines for this sector. Any good accountant will leave one feeling that the job is well done and they can focus on doing what they do best-running their company.
Any accountant will have earned a Bachelor's degree in accounting. Many who own their own practices are CPAs although their employees need not be. Most specialize in some particular type of work, as keeping track of the regulations and paperwork is easier when dealing with only one specialty, such as income tax.
One of these specialties is accounting for non-profit companies. This is much different from the usual type of accounting that is referred to, as charities receive funds in the form of donations as opposed to selling a service or product. The procedures for recording donations is different than that for revenue, which may have delayed recognition.
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.
It is worth mentioning that although some charities utilize the accrual method, which is preferred by the IRS, most use the cash method of accounting. This means that the money is recorded as it is received and expenses are recorded as they occur. Some organizations choose to use a modified cash basis, which allows them to record donations at the time they occur but allows them to record items such as tax withheld from employees using the accrual method.
Donations that occur in tandem with a special event or are considered membership dues are not completely deductible by the donor. The only portion that can be used as a deduction is the difference between the value of the service received and the total amount paid. For example, if an organization holds a charity dinner, the amount that is deductible does not include the value of the meal. This does exclude donations that come with extremely small benefits.
These organizations also have certain classifications for expenses. One is related to the services offered. The other is related to the supporting activities of the organization. These can include fundraising drives, management, and searches for new members. Charities must also depreciate long-term assets but some may be treated differently. A building can be depreciate the same as one would for a for-profit company, however, items such as collections in a museum that would be replaced when sold are not treated in the usual way.
A non profit accountant will be well versed in the proper procedures for this type of record keeping. It is very important to locate one that works only for charities. They need to be familiar with the various FASB guidelines for this sector. Any good accountant will leave one feeling that the job is well done and they can focus on doing what they do best-running their company.
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