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 of any type is usually in possession of at least a Bachelor's degree in accounting. Most who run their own practice are CPAs; some that work under other CPAs may not necessarily possess this certification. Most of them specialize in a certain type of work, such as income tax or estates and trusts.
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.
There are a few charities who use the accrual method that is preferred by the Internal Revenue Service. Most, however, use the cash method. This recognizes cash as it is received and expenses as they are paid. Other organizations may use the modified cash method, this records donations the same as the cash method but allows for items such as taxes withheld from employee's paychecks to be handled using the accrual basis. This is keeping with the preference for recognizing transactions in the proper accounting period.
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.
An accountant of any type is usually in possession of at least a Bachelor's degree in accounting. Most who run their own practice are CPAs; some that work under other CPAs may not necessarily possess this certification. Most of them specialize in a certain type of work, such as income tax or estates and trusts.
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.
There are a few charities who use the accrual method that is preferred by the Internal Revenue Service. Most, however, use the cash method. This recognizes cash as it is received and expenses as they are paid. Other organizations may use the modified cash method, this records donations the same as the cash method but allows for items such as taxes withheld from employee's paychecks to be handled using the accrual basis. This is keeping with the preference for recognizing transactions in the proper accounting period.
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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