Many people are not aware that there are different types of accountants. Usually when one thinks of this profession, it is in relation to companies who operate with the intent to earn a profit. However, one needs a non profit accountant to do the books for a charitable organization.
An accountant has earned at minimum a Bachelor's degree in accounting. Those that run their own firms are usually CPAs, however, their employees do not have to be. Some students work in accounting firms as interns while getting their degrees. Most focus on one specialty, such as tax or investing.
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.
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.
Some donations may have some benefit attached to them, such as those for a charity dinner or membership to the organization. These are not fully deductible as some benefit was received. The only part that can be deducted is the amount paid in excess of the fair value of the benefit received. For example, if someone purchases a plate at a charity dinner, the deductible amount excludes how much the meal is worth. The exception is donations in exchange for very small benefits.
A charity will also have certain expense classifications. One is related to the services that are offered. The other is in relation to supporting activities. These can include expenses in relation to management, fundraising, or management drives. They must also capitalize and depreciate long-term assets although some require different treatment. Things such as museum collections that are replaced when sold are not treated as assets in the traditional way. Fixed assets such as buildings receive a similar treatment to those of 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 has earned at minimum a Bachelor's degree in accounting. Those that run their own firms are usually CPAs, however, their employees do not have to be. Some students work in accounting firms as interns while getting their degrees. Most focus on one specialty, such as tax or investing.
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.
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.
Some donations may have some benefit attached to them, such as those for a charity dinner or membership to the organization. These are not fully deductible as some benefit was received. The only part that can be deducted is the amount paid in excess of the fair value of the benefit received. For example, if someone purchases a plate at a charity dinner, the deductible amount excludes how much the meal is worth. The exception is donations in exchange for very small benefits.
A charity will also have certain expense classifications. One is related to the services that are offered. The other is in relation to supporting activities. These can include expenses in relation to management, fundraising, or management drives. They must also capitalize and depreciate long-term assets although some require different treatment. Things such as museum collections that are replaced when sold are not treated as assets in the traditional way. Fixed assets such as buildings receive a similar treatment to those of 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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