Chapter 6-Understanding Financial Statements for Nonprofits

What is the purpose of financial statements for nonprofit organizations?

• To determine the success in fulfilling their mission

• To demonstrate careful resource use

• Both A and B

• None of the above

Which financial statement represents the cumulative net revenue of a nonprofit?

• Statement of Financial Position (Balance Sheet)

• Statement of Activities (Income Statement)

• Cash-flow Statement

• Statement of Functional Expenses

What are current assets?

• Assets that can be easily turned into cash

• Assets with an operational life of more than a year

• Assets owed by other organizations or individuals

• Assets representing the difference between assets and liabilities

What are pledges receivable?

• Unconditionally promised funds to a nonprofit

• Expenses paid before they are incurred

• Property and equipment of a nonprofit

• Costs of materials and supplies owned by a nonprofit

What is the purpose of depreciation expense?

• To determine the current cost of a fixed asset

• To allocate the original cost of a fixed asset over time

• To track the financial position of a nonprofit

• To calculate the net assets of a nonprofit

What is the purpose of a chart of accounts?

• To track expenses and revenues

• To maintain balance in financial statements

• To track financial performance

• All of the above

Which financial statement summarizes all cash available to the nonprofit during the year and how it was received and used?

• Statement of activities

• Statement of functional expenses

• Cash-flow statement

• Statement of operating expenses

What are the categories in which the cash-flow statement is divided?

• Operating cash flows, investing cash flows, and financing cash flows

• Revenue, expenses, and net assets

• Programmatic services and support services

• Management and fundraising

What does the statement of functional expenses help the board and executive director with?

• Making conscious decisions that align with the nonprofit's goals

• Tracking expenses and revenues

• Maintaining balance in financial statements

• Tracking financial performance

What insights do the nonprofit's financial statements provide?

• Financial health and operations

• Cash available and its usage

• Expenses and revenues

• All of the above