Accounting for Contributions - Not-for-Profit Organizations (Deferral vs Restricted Fund Method)

An NPO that uses the restricted fund method of accounting for contributions receives a contribution that is unrestricted and can be used for general operations. Which one of the following accounts is credited when the contribution is received?

A	Deferred contribution
B	Contribution revenue (general fund)
C	Net assets
D	Various expenses (general fund)

Contribution revenue (general fund)

Which of the following methods can an NPO choose to account for contributions?

A	Cash method or accrual method
B	Deferral method or restricted fund method
C	Unrestricted method or restricted method
D	Unrestricted method, restricted method, or endowment method

Deferral method or restricted fund method

Which one of the following statements describes the use of the restricted fund method of accounting for contributions by NPOs?

A	The balance of unspent funds related to a restricted contribution is presented as a liability within that specific fund.
B	Separate funds are presented for cash contributions, capital contributions, and other contributions.
C	Separate bank accounts must be used for each restricted fund.
D	Different funds are presented in the financial statements of the NPO.

Different funds are presented in the financial statements of the NPO.

In the current year, Grateful Maternity Hospital (GMH), a not-for-profit health-care facility, received a gift of shares of Conglomerate Ltd., a publicly traded company. The shares have a fair market value of $120,000 and can be held or sold at GMH’s discretion. The donor had originally paid $50,000 for the shares five years ago.

If the hospital uses the deferral method, which one of the following describes how it should record the donation?

A	As an increase to net assets of $50,000
B	As contribution revenue of $50,000
C	As deferred contributions of $120,000
D	As contribution revenue of $120,000

As contribution revenue of $120,000

An NPO received a donation of land and a building. Under the deferral method, which one of the following is a full list of the accounts that would be credited at the time the donation is received?

A	Net assets and deferred contributions
B	Net assets
C	Net assets, deferred contributions, and contribution revenue
D	Deferred contributions

Net assets and deferred contributions

Zolo Mentoring Program (Zolo) is an NPO that receives a $50,000 donation that must be spent on advertising to recruit mentors and mentees. Which one of the following types of contribution is this for Zolo?

A	Unrestricted
B	Endowment
C	Capital
D	Restricted

Restricted

Kindness for Kids (KFK), a Canadian NPO, receives a contribution that can be used for fostering-related expenses only, and the NPO does not have a specific fund set up for this purpose. Assuming the NPO uses the restricted fund method of accounting for contributions, which one of the following describes how the contribution should be recorded?

A	As contribution revenue in the general fund when it is received
B	As a direct increase to net assets in the general fund
C	As a deferred contribution in the general fund until the related expenses are incurred, at which time revenue is recognized
D	As a deferred contribution in the general fund until the funds are spent, at which time revenue is recognized

As a deferred contribution in the general fund until the related expenses are incurred, at which time revenue is recognized

An NPO has a deferred contribution on its SFP that relates to a restricted contribution. Assuming the organization uses the deferral method, which one of the following statements must be true?

A	The contribution was entirely spent before the reporting date.
B	The contribution was not spent by the reporting date.
C	The related expenses have not been incurred by the reporting date.
D	The related expenses were incurred prior to the reporting date.

The related expenses have not been incurred by the reporting date.

Which one of the following statements regarding the accounting for a contribution of capital assets to NPOs is true?

A	For capital assets that are amortized, revenue is recorded sooner under the restricted fund method than under the deferral method.
B	For capital assets that are amortized, revenue is recorded sooner under the deferral method than under the restricted fund method.
C	For capital assets that are not amortized, revenue is recorded under the deferral method but not under the restricted fund method.
D	For capital assets that are not amortized, revenue is recorded immediately under both the restricted fund and the deferral methods

For capital assets that are amortized, revenue is recorded sooner under the restricted fund method than under the deferral method.

Which one of the following criteria must be met for an unrestricted contribution to be recognized as revenue by an NPO?

A	Collection is reasonably assured and the amount can be reasonably estimated.
B	The contribution has been collected and any restrictions are specified.
C	Collection is somewhat assured and the amount will be able to be estimated in the current fiscal year.
D	The contribution has been collected and any future contributions can be estimated

Collection is reasonably assured and the amount can be reasonably estimated.