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 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 is accounting for charitable organizations. This differs from the type of accounting that usually comes to mind, as a charity organization deals with different ways of receiving funds as opposed to a company who earns them by selling a product or service. The procedure for donations is much different than for revenue.
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.
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.
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 is accounting for charitable organizations. This differs from the type of accounting that usually comes to mind, as a charity organization deals with different ways of receiving funds as opposed to a company who earns them by selling a product or service. The procedure for donations is much different than for revenue.
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.
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.
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.
About the Author:
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