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.
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 specialty in the accounting field is charitable organizations. This is different that the usual type of accounting that comes to mind because charities earn their money differently. They do not sell a product or service. They mostly receive income in the form of donations and the procedure to record these is different that that of revenue. There is also usually not a delay between receiving funds and the recognition of income.
Most of the monies received by charities are donations. Usually they are deductible on their taxes by the donor. They have to be handled in a certain manner, cash donations are fairly easy, however, some contributions require a slightly different procedure.
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.
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.
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.
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 specialty in the accounting field is charitable organizations. This is different that the usual type of accounting that comes to mind because charities earn their money differently. They do not sell a product or service. They mostly receive income in the form of donations and the procedure to record these is different that that of revenue. There is also usually not a delay between receiving funds and the recognition of income.
Most of the monies received by charities are donations. Usually they are deductible on their taxes by the donor. They have to be handled in a certain manner, cash donations are fairly easy, however, some contributions require a slightly different procedure.
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.
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.
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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