Expert Answers

1. Nonprofit organizations are owned by:
A. Churches
B. Nobody
C. Donors
D. Board of Directors

2. Nonprofit organizations can be exempt under code section:
A. 501 (c) (3)
B. 502 (d) (3)
C. 501 (c) (45)
D. 601 (c) (3)

3. Which of the following is correct?
A. Nonprofits must have a paid President
B. Nonprofits must have a paid CFO
C. Nonprofits must have a paid Board of Directors
D. There is NO need for payment–all positions can be volunteer-based

4. Nonprofits are formed to:
A. Provide public service to a community
B. Make a profit
C. Give the Board of Directors a reasonable return on investment
D. Compete with other for-profit business

5. Which one of these choices is correct about volunteers?
A. Volunteers can NOT run a nonprofit organization
B. The President and vice-presidents can NOT be the only paid employees
C. Volunteers can only perform clerical functions
D. Volunteers are vital in many organizations

6. Which of these choices is correct about government grants?
A. Only the federal government can distribute grants
B. Managing large government grants is easy
C. Government grants may come in with lots of strings
D. Government grants are important to only state-wide nonprofits

7. What are the general areas of a nonprofit organization?
A. Programs, Management/General, and Fundraising
B. Programs, Legal, and Government
C. Fundraising, collections, and receivables
D. Programs, fundraising, and collections

8. The area directly related to an organization’s mission statement is:
A. Fundraising
B. Program
C. General
D. Administrative

9. Which is usually part of the “General and Administrative” area?
A. Preparation of financial statements to the board
B. Requesting donations from the biggest donors
C. Conducting programs related to the mission statement
D. Conducting programs NOT related to the mission statement

10. Fundraising is about:
A. Conducting formal program reviews for excellence
B. Preparing financial statements and accounting supervision
C. Marketing and soliciting funds
D. Paying bills

11. The General fund is normally used for:
A. Operations and day to day activities
B. Holding endowments
C. Holding funds to be used next year
D. Holding funds NEVER to be released

12. Which one of these statements is correct about SFAS 117?
A. Provides guidance about nonprofits’ financial statements
B. Provides guidance about SEC filings
C. Provides guidance about nonprofits’ informational returns
D. Provides guidance about nonprofits’ budgets

13. A temporarily restricted fund is used for:
A. Endowment funds
B. Daily operations
C. Funds to be used in the future
D. Funds NEVER to be used

14. The Program area is directly related to:
A. Donors’ wishes
B. Board of directors’ wishes
C. Members’ wishes
D. The mission statement

15. Which of the following is correct?
A. Nonprofits are exempt from paying Social Security on payroll
B. Nonprofits can hire no more than ten employees per program
C. Nonprofits must file W-2 G on gambling winnings over a certain amount
D. Nonprofits must file 5500 on all gambling winnings

16. “Net assets released from restriction” is
A. A memo account
B. An investment account
C. Reported as expense
D. Reported as revenue

17. An organization paid $300 for an expense that relates to restricted revenue. Which of the following options would be correct per SFAS 116-117?
A. Expense will be charged to a permanently restricted fund
B. Expense will be charged to a temporarily restricted Fund
C. Expense will NOT be booked because it was restricted
D. Expense will be charged to the General fund, meaning the Unrestricted Fund.

18. An organization paid $500 for an expense that relates to restricted revenue. Which of the following options would be correct per SFAS 116-117?
A. “Net assets released from restriction” to be debited in the General fund
B. “Net assets released from restriction” to be debited in a temporarily restricted fund
C. “Net assets released from restriction” to be written up as a memo
D. “Net assets released from restriction” to be ignored

19. Fund/net asset is:
A. an asset
B. a liability
C. a type of cash donation
D. Assets less Liabilities

20. Which of the following is correct?
A. All business transactions of a nonprofit are unrestricted
B. All revenues should be booked in the General fund
C. All funds/net assets are liabilities
D. All business transactions of a nonprofit must be booked in a fund

21. Which of the following is correct?
A. Assets less liabilities=Net Assets
B. Assets are net assets
C. Assets are NOT booked in the nonprofit organizations’ financials
D. Assets are booked, but NOT reported by nonprofits

22. Which of the following is correct?
A. Cash donations are always restricted
B. Nonprofits can NOT accept stock donations because of SFAS 124
C. Cash donations can be restricted or unrestricted
D. Accounting should be totally independent of other processes

23. A pledge is booked as a receivable
A. If a condition must be met
B. If a pledge is made in a will
C. If a firm promises to match employee’s donations
D. If it is unconditional

24. Which of the following is correct?
A. Receipts should be given to all check/cash donations over $250
B. In a dinner situation where the ticket price is $500 and fair market value is $150, the
donor attending the event may be able to deduct $500 in taxes
C. Quid-pro-quo is about services donated to an organization
D. Non-major events are reported in gross in financials

25. In-kind contributions may be booked as
A. Net assets
B. Liabilities
C. Income and expense
D. Investment income

26. Which one of the following is correct?
A. Expenses are shown in the Statement of Activities
B. Expenses and revenues are classified in unrestricted and semirestricted
funds in the Statement of Activities
C. Cash is shown in the Statement of Activities
D. “Net expense released from restrictions” is shown as part of expenses in the Statement of Activities.

27. A donor gives $30,000 to be used after two years for a program. The Journal Entry will contain:
A. Credit to a revenue account in the unrestricted fund
B. Credit to an expense account in the temporarily restricted fund
C. Credit to a revenue account in the temporarily restricted fund
D. Credit to an expense in the permanently restricted fund

28. A donor gives $10,000 to the organization with no limitation or specific way of using it. Which of the following is correct for this situation?
A. $10,000 is temporarily restricted
B. $10,000 is unrestricted
C. $10,000 will NOT be booked
D. $10,000 will NOT be reported

29. Which one of these is correct?
A. Special events are NOT shown in financial statements, unless they gross more than
$50,000
B. Special events can be shown in net basis in financial statements
C. Special events are shown in financial statements if proceeds are restricted
D. Special events can be presented in the Statement of Position

30. The Statement of Financial Position of a nonprofit organization shows:
A. Retained earnings
B. Net Assets
C. Net Income
D. Income

31. The Schedule of Functional Expenses shows:
A. Assets and liabilities by fund
B. Only unallowed costs
C. Expenses in matrix format
D. Mathematical Functions

32. The formula REVENUES – EXPENSES = NET ASSETS relates to which report?
A. Statement of Activities
B. Statement of Position
C. Cash Flow Statement
D. Schedule of Functional Expenses

CASE: You are invited to be on a Board of Directors because of your knowledge of accounting and non-profit organizations. At your first meeting with the Board you realize they need some guidance on the following issues. Your job is to succinctly describe to the Board the basic concepts regarding:

What number of people is a good amount for a Board and why?
How often should the board receive financial statements to look at and review?
What is the Statement of Functional Expenses, what kind of organizations are required to present the statement, and why might most organizations want to show this?
What are the meanings of unrestricted assets, temporarily restricted assets, and permanently restricted assets?
What amount, by percentage of total expenses, should the organization be spending for the expense categories of Program Services, General and Administrative, and Fundraising?