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A
Accessions: additions,
both purchased and donated, to collections held by
museums, art galleries, botanical gardens, libraries
and similar entities.
Account: a record of
an organization's financial transactions maintained
in a special book or ledger. Separate accounts are
kept for assets, liabilities, fund balances, revenues,
and expenses.
Accounts payable: outstanding
bills owed to others for services or merchandise.
Listed in the current liabilities section on the statement
of financial position.
Accounting period: the
period of time for which an operating statement is
customarily prepared, i.e. a month (the most common
accounting period), four weeks, a quarter (of a year),
26 weeks, a year, 52 weeks.
Accounts receivable:
money owed to an organization. Listed in the current
assets section on the statement of financial position.
Accrual-basis accounting:
an accounting system that recognizes expenses when
they are incurred and revenues when they are earned,
rather than when cash changes hands. It records amounts
payable and amounts receivable in addition to recording
transactions resulting from the exchange of cash.
Accrued payroll taxes:
tax money owed to the government on each employee's
salary.
Adjusting (journal) entry:
the record made of an accounting transaction giving
effect to the correction of an error, an accrual,
a write-off, a provision for bad debts or depreciation,
or the like.
Administrative budget:
a financial plan under which an organization carries
on its day-to-day affairs under the common forms of
administrative management; a budget. The term is usually
employed in contradistinction to capital budget or
fund budget, where the plan covers transactions of
a non-operating character.
Annual report: a report
an organization publishers at the end of each fiscal
year. The report includes required elements such as
auditors' report and the organization's statement
of earnings, statement of financial position, and
statement of cash flows. The report also includes
elements such as letters and articles by the organization's
executives, information on its financial condition,
and significant events.
Annuity gift: a gift
whereby money or other property is given to an organization
on the condition that the organization bind itself
to pay periodically to the donor or other designated
individuals stipulated amounts, which payments are
to terminate at a specified time.
Assets: anything organizations
own. These things might be physical assets such as
buildings, inventories of products, equipment, and
cash. Or these things might be intangible assets such
a goodwill, trademarks, and patents. Listed as a category
on the statement of financial position.
Auditor: a firm of certified
public accountants an organization hires as an independent
third party to review its financial information. The
auditor's main purpose is to make sure the statements
of earnings, statement of financial position, and
statement of cash flows fairly present the organization's
financial condition, and that they comply with GAAP.
Auxiliary activity:
an activity that furnishers a service that is not
part of the basic program services of the organization.
A fee is normally charged that is directly related
to, although not necessarily equal to, the cost of
the service, i.e. university dining
halls, student union.
B
Balanced budget: a budget
in which forward expenditures for a given period are
matched by expected revenues for the same period.
Balance sheet: a financial
statement that reports an organization's assets and
the claims against them at a set date noted on the
statement. Also called statement of financial position.
Board-designated restriction:
a restriction that is self-imposed by the Board on
a certain segment of its unrestricted assets for some
specific activity or project that is to be carried
out in the future. Board-designated restrictions have
no legal significance.
Budget: a financial
plan which estimates the monetary receipts and expenditures
for an operating period. Budgets may be directed toward
project or program activities and are primarily used
as a comparison and control feature against the actual
financial results.
C
Capital additions: gifts,
grants, bequests, investment income and gains on investments,
restricted either permanently or for a period of time
by parties outside of the organization to endowment
and loan funds. Such additions also include similar
resources restricted for fixed asset additions but
only to the extent expended during the year.
Capitalizing an asset:
the process of recording the cost of land, building,
and equipment as fixed assets, rather than expensing
them when they were initially acquired.
Cash: currency and checks
on hand and deposits in banks. Listed in the current
assets section on the statement of financial position.
Cash-basis accounting:
an accounting system that records only those events
that involve the exchange of cash and ignores transactions
that do not involve cash.
Cash-disbursements journal:
the journal recording all financial transactions involving
the disbursement of cash.
Cash equivalents: short-term,
temporary securities that can be quickly and easily
converted to cash. Listed in the current assets section
of the statement of financial position.
Cash-flow statements:
a statement of cash income and outgoing between two
given dates.
Chart of accounts: a
list that organizes the agency's accounts in a systematic
manner, usually by account number, that facilitates
the preparation of financial statements and periodic
financial reports.
Comparative statement:
balance sheet, income or flow statements, or other
accounting summaries juxtaposed for the purpose of
contrasting the financial characteristics of an organization
from one period to another.
Conditional promise to give:
a written or oral agreement to contribute cash or
other assets to another entity in which the contribution
depends on the occurrence of a specified future or
uncertain event to bind the promisor.
Current assets: assets
an organization can convert to cash within one year.
Listed in the assets category on the statement of
financial position.
Current liabilities:
obligations an organization has to others, such as
creditors, suppliers, etc., payable within one year.
Listed in the liabilities category on the statement
of financial position.
Current restricted fund:
the fund that contains all the restricted assets that
are available for current use.
Custodian funds: funds
received and held by an organization as fiscal agent
for others.
D
De-accessions: disposition
of items in collections held by museums, art galleries,
botanical gardens, libraries, and similar entities
resulting from sales or disposals.
Debit and credit: technical
bookkeeping terms referring to the two sides of financial
occurrence. The increase or decrease effect on the
account depends on the type of account. The debits
must equal the credits for any given financial occurrence.
Debt: money an organization
has borrowed and must repay, frequently with interest.
Listed in the liabilities category on the statement
of financial position.
Deferred revenue: revenue
that is recorded before it is earned, i.e. payment
for services that have not yet been provided.
Deficit: 1. Expenses
and losses in excess of related income; an operating
loss. 2. An accumulation of operating losses ("negative"
retained income).
Depreciating an asset:
the process by which the cost of a fixed asset is
expensed over its useful life. The annual charge to
expense is referred to as depreciation expense.
Designated funds: unrestricted
funds set aside by action of the governing board for
specific purposes.
Discretionary funds:
funds distributed at the discretion of one or more
trustees, which usually do not require prior approval
by the full board of directors. The governing board
can delegate discretionary authority to staff.
E
Endowment: a unique
type of legal restriction that stipulates that the
assets endowed must remain intact for a stated period
of time or occurrence; the revenue earned from such
assets may be restricted or unrestricted.
Encumbrances: commitments
in the form of orders, contracts, and similar items
that will become payable when goods are delivered
or services rendered.
Excess (deficit) of support
and revenue over expenses: the difference between
"Total Revenue" and "Total Expenses"
representing net financial results of operations for
the period.
Expendable funds: funds
that are available to finance an organization's program
and supporting services, including both unrestricted
and restricted amounts.
Expenditure: the incurring
of a liability, the payment of cash, or the transfer
of property for the purpose of acquiring an asset
or service or settling a loss.
Expenses: costs such
as salaries, rent, office supplies, and advertising.
Listed in the operating expenses category on the statement
of earnings.
F
FASB: the Financial
Accounting Standards Board, is the governing board
that formulates authoritative accounting standards
for nongovernmental agencies. These standards, which
encompass accounting rules, procedures and applications,
define accepted accounting practice and are referred
to as Generally Accepted Accounting Principles (GAAP).
Fixed asset: usually
refers to buildings and equipment that have a relatively
long period of utility.
Full fund accounting:
an accounting system in which all assets are accounted
for separately.
Functional classification:
a classification of expenses that accumulates expenses
according to the purpose for which costs are incurred.
The primary functional classifications are program
and supporting services.
Fund: an accounting
entity established for the purpose of accounting for
resources used for specific activities or objectives
in accordance with special regulations, restrictions,
or limitations.
Fund balance: the difference
between the value of an organization's total assets
and total liabilities.
Funds held in trust by others: resources held and
administered at the direction of the donor by an outside
trustee for the benefit of the organization.
G
Generally accepted accounting
principles (GAAP): . a set of rules and financial
reporting guidelines organizations must follow to
prepare and present the financial information on the
statements.
Grants: an asset given
to an organization by an individual or another organization,
with a legal restriction, usually quite specific,
imposed upon its use.
Guarantor: one who promises
to make good if another fails to pay or otherwise
perform an assigned or contractual task.
I
Income: assets received
resulting in an increase in the fund balance.
Interfund receivable (payable):
an amount that is due from one fund to another.
Interfund transaction:
a transfer of assets from one fund to another.
Investment revenue:
revenue generated by the investment of assets.
L
Liabilities: an organization's
debts to a lender, a supplier, a landlord, and others.
Listed as a category on the statement of financial
position.
Life annuity agreement:
an agreement whereby money or other property is given
to an organization on the condition that the organization
bind itself to pay periodically to the donor or other
designated individual the income earned by the assets
donated to the organization for the lifetime of the
donor or of the designated individual.
Liquid assets: readily
available cash assets that can be used to address
current liabilities.
Loan funds: resources
restricted for loans. When both principal and interest
on the loan funds received by the organization are
loanable, they are included in the loan fund group.
If only the income from a loan is loanable, the principle
is included in endowment funds, while the cumulative
income constitutes the loan fund.
M
Market value: the realizable
amount for which an asset can be sold in the open
market.
Modified cash-basis accounting:
the same as cash-basis accounting except for certain
items that are treated on an accrual basis. This is
also known as a "hybrid method."
Multi-year grant: an
unconditional promise to give grant assets to an organization
by an individual or another organization that extends
beyond one year. These grants must be recognized in
the year the unconditional promise to give is received
and must be recorded using a discount rate to measure
the present value of the estimated future cash flow.
O
Object classification of expenses:
a method of classifying expenditures according to
their natural classification such as salaries and
wages, employee benefits, supplies, purchased services,
and so forth.
One fund accounting:
an accounting system operating with only unrestricted
assets in a single fund classification.
Operating expenses:
costs related to an organization's operation. Examples
are salaries, advertising, and travel. Listed as a
category on the statement of earnings.
Operating reserve: an
unrestricted fund balance that can be used to stabilize
an organization's finances.
P
Permanent restriction:
a donor imposed restriction that stipulates that the
contributed assets be maintained permanently. Unless
otherwise stipulated by the donor or state law, the
organization is permitted to use up or expend part
or all of the income derived from permanently restricted
assets.
Pledge: a receivable
representing a specified sum that an individual or
organization has promised to contribute.
Posting: the process
of recording in the appropriate accounts in the general
ledger, summarized figures of the amounts that were
recorded during the month in the books of the original
entry, the journals.
Promise to give: a promise
to give is a written or oral agreement to contribute
cash or other assets to another entity. A promise
to give must contain sufficient verifiable documentation
that a promise was made and received.
Prospectus: a selling
document used for fundraising. A summary description
of an organization's goals, needs, history, financial
information, and personnel.
Q
Quasi-endowment funds:
funds which the governing board of an organization,
rather than a donor or other outside agency, has determined
are to be retained and invested. The governing board
has the right to decide at any time to expend the
principle of such funds.
R
Refundable advance:
an asset that is transferred to an organization before
a condition has been substantially met. Refundable
advances are recorded as a liability on the balance
sheet until conditions are met at which time they
are recognized as revenue.
Restricted asset: an
asset that has legal restrictions imposed on its use
by outsiders.
Restricted funds: a
fund group that contains assets available to operations
that have specific legal restrictions imposed upon
their use by an external agency such a s a grantor.
Revenue: assets earned
or income from services performed or goods sold.
S
Simplified fund accounting: an accounting system
operating with only two classifications of funds-those
assets that are unrestricted and those assets that
are restricted by grantors and donors for specific
purposes.
Statement of cash flow:
a financial statement that reports the flow of cash
in and out of an organization for a set period, usually
one year. It reports the operating activities, investing
activities and financing activities of the organization.
Statement of changes in financial
expenses: a statement that summarizes the financial
resources available in a period the purposes for which
they were used.
Statement of earnings:
a financial statement that reports the results of
an organization's business operations for a set period,
usually one year. Also called an earnings report,
income statement, statement of operations, and statement
of profit and loss.
Statement of functional expenses:
the financial statement that details the specific
types of expenses by object, i.e. rent, salary, that
were incurred in each of the programs and supporting
activities delineated on the Statement of Revenue,
Expenses and Changes in Fund Balances.
Statement of income expenses
and changes in fund balances: the financial
statement that summarizes the financial activity for
a given period of time. It presents the income, expenses
and inter-fund transfers for the period and shows
the result on the fund balances.
Statement of sources and uses
of cash: an optional statement that summarizes
the cash available in a period and the purposes for
which it was used.
Support: income form
voluntary contributions and grants.
Support services: auxiliary
activities that provide the various support functions
that are essential to achieve the program services.
T
Temporary restriction:
a donor-imposed restriction on contributed assets
that will eventually either expire with the passage
of time or will be fulfilled through action by the
organization.
Term endowment: a fund
that has all of the characteristics of an endowment
fund except that at some future date or occurrence,
it will no longer be required to be maintained as
an endowment fund.
Tipping: The situation
that occurs when a gift or grant is made that is large
enough to significantly alter the grantee's funding
base and cause it to fail the public support test.
Such a gift or grant results in "tipping"
or conversion from public charity to private foundation
status.
Transfer: the moving
of fund balances from one fund to another, usually
as a result of an intended change in the use of assets.
Trial balance: a schedule
listing all the accounts in the general ledger along
with the debit or credit balance in each account to
determine whether the total debits of all accounts
equal the total credits.
U
Unconditional promise to give:
a "no strings attached" written or oral
agreement to contribute cash or other assets to another
entity.
Unrealized gain (or loss):
the amount by which the market value of an asset exceeds
(or is less than) the original cost of that asset.
Unrestricted asset:
an asset that has no legal restrictions placed on
its use by outsiders; it can be used in carrying on
operations in any manner decided upon.
Unrestricted funds: sometimes
called operating funds or general funds, this fund
group contains the assets on which there are no restrictions
by external authority and from which the bulk of financial
activity is usually handled.
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