Introduction
Financial accounting is about bookkeeping and reporting of revenues (in the form of claim on cash to be received) and expenditures (in the form of obligation for cash to be paid). Furthermore, since business enterprises (also referred to as commercial enterprises; Norwegian: private bedrifter) and nonprofit organizations (also referred to as nonbusiness organizations; Norwegian: stiftelser og ideelle organisasjoner) acquire revenues for financing their expenditures in different ways (that is, via market-exchange transactions and one-way money transactions, respectively), they need different types of accounting information: Business enterprises (with profit objectives) need information about the profit effects of their revenues and expenditures, whereas nonprofit organizations (with no profit objectives) need information about the money effects of their revenues and expenditures.
Today, however, most courses in financial accounting only deal with financial accounting for business enterprises, or in other words, business accounting (usually referred to as financial accounting or accrual accounting; Norwegian: finansregnskap eller perioderegnskap). Therefore, this course with its focus on accounting for nonprofit organizations, or in other words, nonprofit accounting, is a good supplement to other courses in financial accounting: It will increase our understanding of nonprofit accounting and it will increase our basic understanding of business accounting, by comparing business and nonprofit accounting, highlighting important similarities and differences.
The course consists of two parts: Part 1 and Part 2.
Part 1
The first part presents the accounting framework to be used in the empirical studies in the second part of the course. In particular, Part 1 begins by presenting the accounting terminology, considering the concepts of revenue and expenditure as the two main accounting concepts. Thereafter, two different accounting models will be presented, explained and compared, by referring to the revenue and expenditure concepts: commercial accounting and fund accounting. Whereas commercial accounting (with a profit focus) has been developed for use by business enterprises (with profit objectives), fund accounting (with a money focus) is particularly useful for nonprofit (and governmental) organizations (with no profit objectives).
Part 2
In this part, we will study the accounts, focusing on the financial statements, of several nonprofit organizations: Ydalir Foundation (Stiftelsen Ydalir), The Church’s City Mission Bergen (Stiftelsen Kirkens Bymisjon Bergen), Norwegian Health Association (Nasjonalforeningen for folkehelsen), Medecins Sans Frontieres Norway (Leger Uten Grenser Norge), Norwegian Red Cross (Norges Røde Kors) and Danish Red Cross.
First, we will study the official commercial financial statements (referred to as Result statement and Balance sheet statement). Second, we will prepare new fund financial statements (referred to as Overview of revenues and expenditures as well as Overview of money status) for these organizations. Third, these two sets of financial statements (i.e., the commercial and fund financial statements) will be compared, discussing which financial statements nonprofit organizations should prepare. When so doing, we will keep in mind that nonprofit organizations acquire revenues for financing their expenditures via one-way money transactions (like grants, donations and contributions) and not via market-exchange transactions (like selling pens to customers in exchange for money received from the customers).
Closing
All course material is in English, but (almost) all of this material will also be available in Norwegian, including the course report and the course material related to the empirical studies.