GROUP 9

EDUCATIONAL
INSTITUTION
PAMINTUAN | PANED | PLANAS | REGINALDO| SOLIVEN
What is a Non-profit
Organization?
NON-PROFIT ORGANIZATION

entity that is operated for the benefit of society as a whole

rather than for the benefit of an individual proprietor or a
group of partners or shareholders.
NON-PROFIT ORGANIZATION
includes professional organizations, schools, colleges and
universities, hospitals, churches, charities and social service
groups.

Such organizations are Hospitals, Voluntary health and

Welfare organizations, Schools, Colleges and Universities,
Labor unions, Foundations, Religious organizations etc.
 DID YOU KNOW?

ACCORDING TO THE STUDY ON GLOBAL CIVIL SOCIETY THERE ARE

FIVE STRUCTURAL OPERATIONAL FEATURES THAT DEFINED
ORGANIZATIONS WITHIN NPO SECTOR:
Ø ORGANIZED – They have some structure and regularity
to their operation, whether or not they are formally
constituted or legally registered.
Ø PRIVATE – They are not part of the apparatus of the
state.
Ø NOT PROFIT DISTRIBUTING - they are not primarily
commercial in purpose and do not distribute profits to a
set of directors, stockholders, or managers.

Ø SELF-GOVERNING- They have their own mechanisms

for internal governance.

Ø VOLUNTARY- Membership or participation is not

mandatory.
THE ACTIVITIES OF
AN EDUCATIONAL
INSTITUTION MAY BE 1. Instructional - include both
CLASSIFIED AS: resident and extension instruction.
THE ACTIVITIES OF 2. Administrative – include staffing
AN EDUCATIONAL and promotion, registration and
INSTITUTION MAY BE enrollment, operation of the
CLASSIFIED AS: business office, and operation and
maintenance of the educational
plant.
THE ACTIVITIES OF 3. Auxiliary - include the operation
AN EDUCATIONAL of residence halls, dining rooms,
INSTITUTION MAY BE college unions and bookstores,
CLASSIFIED AS: health centers, and athletic and
cultural programs.
CURRENT
CURRENT
FUNDS
CURRENT FUND

composed of current resources that are to be employed in

meeting obligations arising from the general operations of
the educational institution
• Current unrestricted fund that consists of
the resources that can be applied to current
purposes without restriction
• Restricted current funds consisting of
resources that, while available for current
purposes, are subject to certain limitations
in their application
Accounting practices that are special in
accounting for the educational unit include the
employment of “a modified accrual basis”. In
general, the accounts of colleges and
universities should be kept on the accrual basis.
 Supporting schedules are prepared to reflect
receivables from students for tuition fees. These
schedules, however, are not reflected on the balance
sheet and therefore the corresponding income is not
reflected on the statement of activities.
 Educational and general revenue for year ended June 30, 20B P3,000,000 of which P150,000 has not
yet been collected
Account Titles Debit  Credit 

Cash   2,850,000   

Account Receivables       150,000   

  Student fees     1,620,000 

  Gifts and grants         920,000 

  Endowment income           60,000 

  Sales & service-educational         325,000 

depts.

  Income from org. acts. Rel. to           40,000 

educ. depts

  Income from other sources           35,000 

Revenue related to auxiliary unit bookstore, P262,500 of which P25,
000 has not yet been collected Revenue for student aid, P400,000 collected

Account Titles Debit  Credit  Account Titles Debit  Credit 

Cash       237,500   

Cash       400,000   

Accounts Receivable         25,000   

  Revenue for         400,000 

student aid
  Revenue-         262,500 
auxiliary unit
LOAN
LOAN
FUNDS
LOANS FUND

consist of resources that are available for loans to

students. Loan funds originate from gifts, they may be built
up over a period of years from student fees collected for
such purpose or from transfers from endowment funds
whose income is available for such purpose.
Loans may be made with or without interest
depending upon the conditions established by
those providing the loan fund.

Loan funds are regarded as nonexpendable

uncollectible loans, fund administrative
expenses, and losses on the sale of fund
investments, and gains on the sale of fund
investments.
 Receipt of cash gift to be used for loans to students, P50,000

Account Titles Debit  Credit 

Cash       50,000   

  Loan Fund net   50,000 

assets
Purchase of securities for P25,000 which includes accrued
interest of P600

Account Titles Debit  Credit 

Investments         25,000   

Accrued interest               600   

  Cash           25,600 
 Loans to students, P20,000

Account Titles Debit  Credit 

Notes receivable         20,000   

  Cash           20,000 
• Loan fund resources are balanced by the
account Loan Fund Balance/ Loan Fund Net
Assets. During the period, entries are made
to record the operations of the fund.
• Nominal accounts may be established to
summarize the separate sources of fund
increases and decreases for a period; when
fund changes are few in number, changes
are recorded directly in the loan fund
balance/ loan fund net asset balance.
ENDOWMENT
ENDOWMENT &
NONEXPANDABLE
FUNDS
ENDOWMENT FUND
is formed when cash or other properties are transferred to the
institution under conditions that provide that only the income
produced by such resources can be used for the benefit of the
institution.

Fund, principal, then is unexpandable

Although fund principal may change as a result
of the sale of restrictions placed on the use of
fund income by the institution, the endowment is
referred to as an Unrestricted Endowment.

When the use of the fund income is limited to

certain objectives, the endowment is called a
Restricted Endowment.
• Income from an unrestricted endowment
becomes available to the unrestricted
current fund.

• Income from a restricted endowment is

transferred to the appropriate restricted
current fund or to the plant fund.
In some instances, assets are transferred to a
trustee who assumes the responsibility for
administering the endowment. Here, the trustee
transfers endowment income to the institution
for use in accordance with the terms of the
endowment.
FUND In other instances, resources not
currently required by unrestricted
TEMPORARILY current funds may be transferred
FUNCTIONING out of this fund to be administered
as an endowment until the
AS AN resources are required for
ENDOWMENT alternative use.
An institution may arrange for pooling the
resources of some or all of its endowments
when such action is not prohibited by terms of
the individual endowments.
 Receipt of cash from donor in establishment of endowment
Fund A, P1,000,000. No restrictions are made as to use of
endowment income.

Account Titles Debit  Credit 

Cash     1,000,000   

  Endowment Fund A     1,000,000 

balance
 Receipt of securities from 2 donors in establishment of Endowment Funds B and C. Endowment
Fund B- 10,000 shares of X Co. ordinary shares, value on date of transfer is P715,000. Endowment
Fund C- 2,500 shares of Y Co. preference shares, value on date of transfer P245,000. No
restrictions are made as to use of endowment income

Account Titles Debit  Credit 

Investments-ordinary shares     715,000   

Investments-preference shares     245,000   

 
Endowment Fund B balance  
    715,000 

 
Endowment Fund C balance  
    245,000 
Pooling of Endowment Funds A, B, and C. Endowment fund balances were restated in terms of
market values of securities as of date of pooling as follows: Ordinary shares market value,
P750,000 and Preference shares market value – P250,000.

Account Titles Debit  Credit 

Pooled Cash   1,000,000   

Pooled investments- ordinary shares       750,000   

Pooled investments- preference shares       250,000   

  Cash     1,000,000 

  Investments- ordinary shares         715,000 

  Investments- preference shares         245,000 

  Endowment Fund B balance           35,000 

  Endowment Fund C balance             5,000 

 Purchase of P900,000 of Z Co. bonds at a price of
105
Account Titles Debit  Credit 

Pooled investments- bonds 900,000   

Pooled investments - unamortized   45,000  

bond premium

  Pooled cash   945,000

 Collection of interest and dividends on pooled
investments, P107,500

Account Titles Debit  Credit 

Pooled Cash     107,500   

  Undistributed pooled       107,500 

income
 Premium amortization on pooled investments, P2,
500

Account Titles Debit  Credit 

Undistributed pooled income         2,500   

  Pooled           2,500 
investments-
unamortized bond
premium
 Distribution of income on pools endowments to unrestricted and restricted
current funds: Endowment Fund A: 1,000,000 / 2,000,000 x 105,000 or P52,500.
Endowment Fund B: 750,000/ 2,000,000 x 105,000 or P30,375. Endowment
Fund C: 250,000/ 2,000,000 x 105,000 or P13,125

Account Titles Debit  Credit 

Undistributed pooled income       105,000   

  Pooled cash         105,000 

 Sale of Y Co. preference shares for P260,000

Account Titles Debit  Credit 

Pooled cash     260,000   

  Pooled investments-       250,000 

preference shares

  Gains and losses on pooled       10,000 

investments
 Receipt of gift of properties to be used as a dormitory. Net income after
recognizing an annual charge for depreciation of P10,000 is to be used
for certain restricted purposes. Appraised values of properties in date of
gift: Land – P125,000, Buildings – P175,000

Account Titles Debit  Credit 

Land         125,000   

Buildings       175,000   

  Endowment Fund D         300,000 

balance
 Receipt of cash from unrestricted current fund to be used as an
endowment fund until alternative use is authorized, P50,000

Account Titles Debit  Credit 

Cash   50,000   

  Principal temporarily           50,000 

functioning as
Endowment

  Fund E balance    
 To recognize resources of P400,000 held by trustee as an
endowment. No restrictions are made as to use of endowment
income.
Account Titles Debit  Credit 

Fund held by trustee       400,000   

  Endowment Fund F         400,000 

balance
 Amount receivable from restricted current fund representing
recovery of depreciation on endowment properties (dormitory),
P10,000

Account Titles Debit  Credit 

Due from restricted current fund         10,000   

  Accumulated           10,000 
depreciation-buildings
ANNUITY
ANNUITY
FUNDS
ANNUITY FUND

is formed when cash or other properties are transferred to

the institution subject to the requirement that specified
payments be made to a designated beneficiary during his
lifetime.
ANNUITY FUND
The payments to an annuitant may be variable amount or they
may be fixed; they may be equal to the income produced by the
fund assets or they are more or less than such amounts. Upon
the death of an annuitant, undistributed fund resources
become available for use in accordance with the terms of the
annuity agreement.
What is an Annuitant?
 ANNUITY FUND BALANCE
INCREASED DECREASED
• gifts subject to annuity • losses on the sale of
agreements assets

• gains on the sale of annuity • payments to annuitants

fund assets
• asset transfers
• annuity fund income
 Receipt of cash of P125,000 subject to condition that P5,000 per year be paid to the donor during his Purchase of securities for P120,000 that includes accrued
lifetime, any balance available for educational and general purpose interest of P2,000

Account Titles Debit  Credit  Account Titles Debit  Credit 

Investments       118,000   
Cash         125,000   

Accrued interest           2,000   

  Annuity net         125,000 
assets
  Cash         120,000 

Collections of income for the year ended June 30, 20B, P9,500

Account Titles Debit  Credit 

Cash             9,500   

  Accrued interest             2,000 

  Annuity net assets             7,500 

Recognition of amount payable to annuitant, P5,000 Amount becoming available for educational and general purposes
according to annuity agreement, P2,500

Account Titles Debit  Credit  Account Titles Debit  Credit 

Annuity net assets           2,500   

Annuity net assets           5,000   

  Due to             2,500 
Unrestricte
  Due to             5,000  d Current
annuitant Fund
PLANT
PLANT
FUNDS
PLANT FUNDS
Resources related to the educational
Three self-balancing groups of
plant
accounts
(1) resources that are held for plant
expansion and replacement (1) Unexpended plant funds
(2) resources that are held for retirement of (2) Retirement of
long-term debt incurred in the acquisition of
indebtedness funds
the plant
(3) the specific physical resources (3) Invested in plant.
comprising the plant.
UNEXPENDED PLANT FUNDS

Includes cash, securities, receivables, and other

assets that will be used to acquire new plant or
replace existing plant.

Current obligations against these resources for

construction in progress of current plant acquisitions
are recognized as liabilities on the unexpended plant
fund books.
 ASSET - LIABILITIES
=
UNEXPENDED PLANT FUNDS
Balance is divided into:

(1) the portion to be applied to plant additions

(2) the portion to be applied to renewals and

replacements.
RETIREMENT OF INDEBTEDNESS
consists of cash, securities, and other assets that
are to be used for the retirement of plant
indebtedness. Fund accounts are balanced by a
single fund balance reporting total resources
available for retirement of indebtedness.
INVESTED IN PLANT

This grouping consists of the individual property

items that compose the educational plant. This
grouping also carries any long-term indebtedness
relating to plant acquisitions.
PLANT ASSET - RELATED LIABILITIES
=
INVESTMENT IN PLANT BALANCE
This balance is commonly divided to show the
different sources of plant financing – gifts, current
funds, and endowment funds.
 Receipt of cash gift to be used for plant acquisitions, Issue of bonds to raise funds for construction of buildings,
P100,000 P1,500,000
Account Titles Debit Credit Account Titles Debit Credit

Cash 100,000 Cash 1,500,000

  Unexpended plant 100,000

funds balance-   Unexpended plant 1,500,000
plant addition funds balance-plant
additions

Receipt of cash from unrestricted current fund for plant renewals and replacements in subsequent periods,
P30,000.
Account Titles Debit Credit

Cash 30,000

  Unexpended plant funds 30,000

balance-renewals and
replacements
 Completion of buildings at contract price of P1,500,000
Payment of additions to buildings, P85,000

Account Titles Debit Credit Account Titles Debit Credit

Unexpended plant funds 85,000 Unexpended plant funds 1,500,000

balance-plant addition balance-plant additions

  Cash 85,000   Contract 1,500,000

payable
 Collection of interest on investments, P750

Account Titles Debit Credit

Cash 750

  Unexpended plant 750

funds balance-plant
additions
 Receipt of cash from unrestricted current for payment of mortgage
Payment of mortgage installment due, P25,000
instrument due, P25,000

Account Titles Debit Credit Account Titles Debit Credit

Cash 25,000
Retirement of indebtedness 25,000
funds balance
  Retirement of 25,000
indebtedness
funds
balance
  Cash 25,000
 Receipt of cash gift to be used for payment of installments due
on mortgage in 20C- 20E, P75,000

Account Titles Debit Credit

Cash 75,000

  Retirement of 75,000
indebtedness
funds balance
 Receipt of gift of land, buildings, and equipment for educational and general purpose valued at P4,
000,000; properties are subject to mortgage for P1,000,000.

Account Titles Debit Credit

Land 850,000

Improvements other than buildings 150,000

Buildings 2,500,000

Equipment 500,000

  Mortgage payable 1,000,000

  Investment in plant- from 3,000,000

gifts
 Addition to buildings financed by gifts reported in unexpended Issue of bonds to be used for construction of buildings, P1,500,
plant funds, P85,000 000

Account Titles Debit Credit Account Titles Debit Credit

Buildings 85,000
Buildings to be acquired 1,500,000

  Investment in 85,000
plant-from
gifts
  Bonds 1,500,000
payable
 Completion of buildings financed by bond issue Payment by retirement of indebtedness funds of current installment due
on mortgage, P25,000

Account Titles Debit Credit Account Titles Debit Credit

Mortgage payable 25,000

Buildings 1,500,000

  Investment in 25,000
plant- from
  Buildings to 1,500,000 current funds
be acquired
 Acquisition by general current fund of equipment, P15,000 Acquisition by endowment fund of a dormitory valued at P300,
000

Account Titles Debit Credit Account Titles Debit Credit

Land 125,000
Equipment 15,000

Buildings 175,000

  Investment in 15,000
plant-from   Investment in 300,000
current funds plant- from
endowments
 To record depreciation in buildings represented by endowment,
Retirement of equipment carried at P5,000
P10,000

Account Titles Debit Credit Account Titles Debit  Credit 

Investment in plant- 10,000

endowments Investment in plant - from 5,000   
gifts

  Accumulated 10,000
depreciation
  Equipment   5,000 
AGENCY
AGENCY
FUNDS
AGENCY FUNDS
The educational institution frequently acts as an
agent or trustee, holding certain assets on behalf
of others.
When agency operations are simple and of
limited duration both asset accounts and
accounts expressing the institution’s
accountability to others may be carried in the
general or current fund.
When operations are involved and continuing, an
agency fund may be recognized and special agency
books established for the properties subject to
agency control. Agency funds may be established
for pension and retirement resources, special
organization resources, student deposits, and tax
withholding amounts
EXAMPLE OF WHAT AGENCY FUNDS ARE:
Source: Northwestern University

• Faculty professional organizations - for professors with official positions within

a professional organization (e.g. editor of a journal).
• Fraternities & Sororities - NU purchases goods and services for fraternities &
sororities and then invoices them for reimbursement.
• Other Affiliated Institutions - for independent organizations, usually on campus,
that are closely connected to the University such as alumnae, credit union, and
student publishing.
CONCLUSION
Accounting for a nonprofit is imperative as these
organizations play a vital role in ensuring a better
life in the society

Non-profit accounting is faced with challenges of

inadequate skills just like accounting for-profits.
The field is also undergoing changes to cope with
the dynamic economic conditions.