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 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.
It is worth mentioning that although some charities utilize the accrual method, which is preferred by the IRS, most use the cash method of accounting. This means that the money is recorded as it is received and expenses are recorded as they occur. Some organizations choose to use a modified cash basis, which allows them to record donations at the time they occur but allows them to record items such as tax withheld from employees using the accrual method.
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.
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.
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 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 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.
It is worth mentioning that although some charities utilize the accrual method, which is preferred by the IRS, most use the cash method of accounting. This means that the money is recorded as it is received and expenses are recorded as they occur. Some organizations choose to use a modified cash basis, which allows them to record donations at the time they occur but allows them to record items such as tax withheld from employees using the accrual method.
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.
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.
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.
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