FAC1502 EXAM Questions and Answers
Verified Solutions Latest Update
Question:
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.
Question:
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.
Question:
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).
Question:
Unconditional pledge/contribution
Answer:
Recognize as revenue immediately when the unconditional promise is made (or when
received).
, Question:
Bequest
Answer:
Treat bequests as contribution-type inflows when they become unconditional.
Question:
Endowment
Answer:
Endowments are classified as net assets with donor restrictions (because donor
stipulates preservation or restrictions).
Question:
Restricted (temporary/permanent)
Answer:
NFP net assets are split into two classes: With donor restrictions and Without donor
restrictions.
Question:
Functional expense classification
Answer:
Functional reporting explains what the expense was for: Program services:
mission/core purpose; Supporting services: general & administrative + fundraising.
Question:
Natural expense classification
Answer:
Natural classification is the type of cost, such as salaries, depreciation, rent,
advertising.
Verified Solutions Latest Update
Question:
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.
Question:
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.
Question:
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).
Question:
Unconditional pledge/contribution
Answer:
Recognize as revenue immediately when the unconditional promise is made (or when
received).
, Question:
Bequest
Answer:
Treat bequests as contribution-type inflows when they become unconditional.
Question:
Endowment
Answer:
Endowments are classified as net assets with donor restrictions (because donor
stipulates preservation or restrictions).
Question:
Restricted (temporary/permanent)
Answer:
NFP net assets are split into two classes: With donor restrictions and Without donor
restrictions.
Question:
Functional expense classification
Answer:
Functional reporting explains what the expense was for: Program services:
mission/core purpose; Supporting services: general & administrative + fundraising.
Question:
Natural expense classification
Answer:
Natural classification is the type of cost, such as salaries, depreciation, rent,
advertising.
