Example Banking

, we have developed some recommendations. It is important that your Financial Statements communicate useful information to members, contributors, and others. Having easy to understand and clear Financial Statements will make donors confident their donations will be put to good use. As a not-for-profit organization, PHC is required to follow GAAP for private enterprises, as well as not-for-profit GAAP, effective January 1, 2012.

If you have any questions or concerns, feel free to contact us. We will begin by describing a little bit about General Funds and Capital Funds.

General Fund

We recommend this fund is where your assets and liabilities related to PHC’s operating activities be kept. For example, the rental payments received on a monthly basis will be deposited to a cash account that is in the General Fund.

Capital Fund

We recommend this fund to be used for restricted funds that were raised for specific reasons. For example, the donations received from the “special fundraising drive” for the central air conditioning system will be kept in a cash account, in the Capital Fund.

Air Conditioning at PHC

PHC has two methods available to account for the Air Conditioning system. Both the Deferral Method and Restricted Fund Method fall within GAAP. Below, we outline the two methods and make our recommendation.

Deferral Method: The Air Conditioning system is being financed by a special fundraising drive. The $30,000 should be held in an account “Deferred Revenue” until the system is installed. Once installed, then revenue will begin to be recognized. Revenue will be recognized to the amount of depreciation that is amortized on a period by period basis. The $22,500 in pledges can be entered as pledges receivable, or not entered at all. Keeping the $22,500 off of the financial statements would increase the conservatism. The $22,500 can only be added if this amount is both a reasonable estimate and collection is reasonable assured.

Restricted Fun Method: Using the...