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.
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 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 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 are actually membership dues or occur in relation to a special event may not be fully deductible. The difference between the fair value of what was received and the total paid is all that is allowed as a deduction. If a charity hosts a dinner, the deductible amount excludes the fair value of the dinner. The one exception is donations in return for a negligible benefit.
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 know the ins and outs of keeping records for these types of organizations. It is important to find one that specializes in this type of work. They must be familiar with the FASB guidelines for this particular sector. A good accountant will give you the peace of mind in knowing that the job is well done.
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 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 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 are actually membership dues or occur in relation to a special event may not be fully deductible. The difference between the fair value of what was received and the total paid is all that is allowed as a deduction. If a charity hosts a dinner, the deductible amount excludes the fair value of the dinner. The one exception is donations in return for a negligible benefit.
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 know the ins and outs of keeping records for these types of organizations. It is important to find one that specializes in this type of work. They must be familiar with the FASB guidelines for this particular sector. A good accountant will give you the peace of mind in knowing that the job is well done.