Planning and Finance - Identifying Financial Objects

The land, which is owned and located by the nonprofit

• Asset- Restricted by time or purpose

• Asset- Restricted in perpetuity

• Liability

• Net Asset

• Asset- unrestricted

Answer explanation

The question pertains to the classification of land owned by a nonprofit. It falls under 'Assets' as it is a resource owned by the entity. However, the choice was between different types of assets. As it is not specified that this asset is restricted by time, purpose or in perpetuity, we conclude that it is 'Asset - unrestricted'.

Salaries owed to employees (but not yet paid)

• Asset - restricted by time or purpose

• Asset - restricted in perpetuity

• Liability

• Net Asset

• Asset - unrestricted

Answer explanation

Salaries owed to employees but not yet paid are considered a 'liability'. This is because the company is obligated to pay these salaries at a future date, making it a financial obligation or 'liability' that the company is required to fulfill.

A $100,000 grant is to be paid next year for a specific purpose by a foundation.

• Asset - unrestricted

• Asset - restricted by time or purpose

• Asset - restricted in perpetuity

• Liability

• Revenue

Per diems are paid to touring performers.

• Asset - unrestricted

• Asset - restricted by time or purpose

• Asset - restricted in perpetuity

• Liability

• Expense

Answer explanation

Per diems are daily allowances given to touring performers to cover their expenses. Hence, they are considered as expenses not assets or liabilities. Therefore, the correct answer is 'Expense'.

Commercial insurance is paid before the effective date of the policy (prepaid).

• Asset - unrestricted

• Asset - restricted by time or purpose

• Asset - restricted in perpetuity

• Liability

• Expense

Answer explanation

The correct answer is 'Asset - unrestricted'. Commercial insurance is paid before the effective date of the policy and thus, it is not restricted by time or purpose, and neither is it an expense or liability. It is an asset that is free from any limitations. If the company chose to cancel the policy today, the remaining balance would be returned, hence it is an asset.

A mortgage on the organization's building

• Asset - unrestricted

• Asset - restricted by time or purpose

• Asset - restricted in perpetuity

• Liability

• Expense

Salaries paid to employees last week

• Unrestricted Asset

• Asset Restricted by Time or Purpose

• Expense

• Liability

• Revenue

Answer explanation

The question asks about the classification of salaries paid to employees last week. The correct answer is 'Expense'. Salaries are considered an expense because they are costs incurred in the course of conducting business. They're not an asset, liability, or revenue. They're accounted for when they're paid, so they fall under the category of expenses.

A bill for office supplies from Staples that was paid last week.

• Asset- unrestricted

• Net Asset

• Revenue

• Expense

• Asset - Restricted

Answer explanation

The question asks about a bill for office supplies from Staples that was paid last week. This is considered an 'Expense', not an asset or revenue. When a business pays for office supplies, it is incurring an expense. Therefore, the correct option is 'Expense'.

An organization has a surplus at the end of its fiscal year. In which category on the balance sheet will this surplus be reflected?

• Net Asset

• Asset - Temporarily Restricted

• Asset - Restricted in Perpetuity

• Liability

• Revenue

Answer explanation

A surplus at the end of the fiscal year is reflected in the 'Net Asset' category on the balance sheet. It is not a liability nor a revenue, and is not part of the temporarily restricted or restricted in perpetuity assets. Thus, the correct answer is 'Net Asset'.

Money from ticket sales for a performance that has already taken place.

• Revenue

• Asset - restricted by time or purpose

• Asset - restricted in perpetuity

• Liability

• Asset - unrestricted