ACC412 Nonprofit Accounting

• Topics

  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.

• Learning outcome

  When completing the course, a student shall have the following learning outcome

  Knowledge

  • have a precise accounting terminology that is applicable to both accounting for commercial enterprises and nonprofit organizations

  • understand similarities and differences between accounting for commercial enterprises and nonprofit organizations

  Skills

  • be able to understand the information in the accounts of business enterprises (using commercial accounting with a profit focus)

  • be able to understand the information in the accounts of nonprofit organizations (using modified variants of commercial accounting with a profit focus)

  • be able to prepare alternative accounts for nonprofit organizations (using fund  accounting with a money focus)

  General competence

  • can communicate accounting information related to both commercial enterprises and nonprofit organizations in an understandable way

  • can discuss accounting issues related to both commercial enterprises and nonprofit organizations

• Teaching

  Classroom lectures, classroom problems and hand-in problems.

• Compulsory Activity

  There are two hand-in problems in Part 1, of which one of the problems must be handed in before attending the first examination.

• Assessment

  The examination constitutes of two parts that must be passed in the same semester:

  The first examination is an individual written digital home exam over 3 days and constitutes 25% of the final mark, it will take place at the end of Part 1 and it will be based on the topics in Part 1. The exam will be published day 1 at 09:00, with submission deadline day 3 by 14:00.

  The second examination is a written digital individual or group examination (maximum 3 students per group) over 10 days and constitutes 75% of the final mark. It will take place after the last lecture in the course. This examination will consist of a case study of the annual accounts of a specific nonprofit organization, in form of the financial statements and notes extracted from the annual report of this organization. The topics in Part 1 of the course are also relevant for the second examination. The exam will be published day 1 at 09:00, with submission deadline day 10 by 14:00.

• Grading Scale

  A-F

• Literature

  Literature

  Course report (English):

  Monsen, N., Commercial and fund accounting: Introduction and comparison with a view to use by nonprofit organizations (NHH Norwegian School of Economics and UiS Business School, 4th edition, August 2023).

  Course report (Norwegian):

  Monsen, N.,Forretningsregnskap og fondsregnskap: Innføring og sammenligning med henblikk på bruk ved utarbeidelse av regnskap for ideelle organisasjoner

              (Norges Handelshøyskole og Handelshøgskolen ved UiS, 2. utgave, november 2023).

   

  Supplementary literature:

  Anthony, R N., Making sense of Nonbusiness Accounting, Harvard Business Review (1980), May-June, pp. 83-93.

  Anthony, R.N., Should business and nonbusiness accounting be different? (Boston, Massachusettes: Harvard Business School Press, 1989).

  Anthony, R N., Commentary: The Nonprofit Accounting Mess, Accounting Horizons (1995), Vol 9, No 2, June, pp. 44-53.

  Herzlinger, R.E. and Sherman, H.D., Advantages of Fund Accounting in ´Nonprofits´, Harvard Business Review (1980), May-June, pp. 94-105

  Jones, R.H. (1982), Financial Reporting in Nonbusiness Organizations, Accounting and Business Research (1982), Autumn, pp. 287-295.

• Permitted Support Material

  All written support material permitted (category III).

  Calculator.

  One bilingual dictionary (Category I).

  All in accordance with Supplementary provisions to the Regulations for Full-time Study Programmes at the Norwegian School of Economics Ch.4 Permitted support material https://www.nhh.no/en/for-students/regulations/https://www.nhh.no/en/for-students/regulations/ and https://www.nhh.no/en/for-students/examinations/examination-support-materials/https://www.nhh.no/en/for-students/examinations/examination-support-materials/