FAC1502 EXAM PREP EXAMINATION TEST
COMPLETE QUESTIONS AND ANSWERS
FULL SOLUTION VERIFIED
●● Support / donation / contribution / pledge
Answer: Contributions are a major revenue source for NFPs and are
recorded as revenue when received or unconditionally promised. Pledges
are promises to give (often in the future) and may be recognized
immediately if unconditional.
●● Non-cash contributions (non-financial assets, services)
Answer: Significant donated materials/facilities/assets are recorded at
fair market value as contribution revenue when received. Donated
services are only recorded when certain criteria are met.
●● Conditional pledge/contribution
Answer: A contribution is conditional if it includes BOTH: a barrier the
organization must overcome, AND a right of return to the donor (if the
barrier is not met).
●● Unconditional pledge/contribution
Answer: Recognize as revenue immediately when the unconditional
promise is made (or when received).
, ●● Bequest
Answer: Treat bequests as contribution-type inflows when they become
unconditional.
●● Endowment
Answer: Endowments are classified as net assets with donor restrictions
(because donor stipulates preservation or restrictions).
●● Restricted (temporary/permanent)
Answer: NFP net assets are split into two classes: With donor
restrictions and Without donor restrictions.
●● Functional expense classification
Answer: Functional reporting explains what the expense was for:
Program services: mission/core purpose; Supporting services: general &
administrative + fundraising.
●● Natural expense classification
Answer: Natural classification is the type of cost, such as salaries,
depreciation, rent, advertising.
●● Contribution revenue
Answer: Contributions are distinguished by four features: unconditional,
nonreciprocal, voluntary, not an ownership investment.
COMPLETE QUESTIONS AND ANSWERS
FULL SOLUTION VERIFIED
●● Support / donation / contribution / pledge
Answer: Contributions are a major revenue source for NFPs and are
recorded as revenue when received or unconditionally promised. Pledges
are promises to give (often in the future) and may be recognized
immediately if unconditional.
●● Non-cash contributions (non-financial assets, services)
Answer: Significant donated materials/facilities/assets are recorded at
fair market value as contribution revenue when received. Donated
services are only recorded when certain criteria are met.
●● Conditional pledge/contribution
Answer: A contribution is conditional if it includes BOTH: a barrier the
organization must overcome, AND a right of return to the donor (if the
barrier is not met).
●● Unconditional pledge/contribution
Answer: Recognize as revenue immediately when the unconditional
promise is made (or when received).
, ●● Bequest
Answer: Treat bequests as contribution-type inflows when they become
unconditional.
●● Endowment
Answer: Endowments are classified as net assets with donor restrictions
(because donor stipulates preservation or restrictions).
●● Restricted (temporary/permanent)
Answer: NFP net assets are split into two classes: With donor
restrictions and Without donor restrictions.
●● Functional expense classification
Answer: Functional reporting explains what the expense was for:
Program services: mission/core purpose; Supporting services: general &
administrative + fundraising.
●● Natural expense classification
Answer: Natural classification is the type of cost, such as salaries,
depreciation, rent, advertising.
●● Contribution revenue
Answer: Contributions are distinguished by four features: unconditional,
nonreciprocal, voluntary, not an ownership investment.
