non profit financial literacy€¦ · • [email protected] • (902) 468-1414 • 206-15...
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Non Profit Financial Literacy
Debi J. Peverill
Workshop 2
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Agenda
• Financial literacy for non profits:
Financial statements
Budgeting
Corporate income tax
Harmonized sales tax
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FINANCIAL STATEMENTS
• Balance Sheet
• Income statement
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Purpose of Financial
Statements• To report to stakeholders the actual
historical results of an organization
• Stakeholders include:∙ Shareholders
∙ Creditors
∙ Employees
∙ Regulatory authorities
∙ General public
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Balance Sheet
The balance
sheet is a
snapshot of your
organization it
compares your
assets with your
liabilities and tells
you what the
equity is of the
organization .
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SAMPLE STATEMENT OF NET ASSETS
December 31,2015
ASSETS
2015 2014
Cash $2,000 $2,000
Grants receivable $2,363 $2,772
$4,363 $4,772
LIABILITIES
Accounts payable $1,500 $2,000
NET ASSETS
Net assets $2,863 $2,772
$4,363 $4,772
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Asset
• Valuable resources owned by the corporation
• An asset can be monetary or capital
• Monetary assets such as:
• Money in the bank
• Accounts receivable
• Inventory
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Money in the Bank - Cash
• The best type of asset
to have
• Very liquid
• Easy to write cheques
when you have cash
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Accounts Receivable
• Amounts your
customers or funders
owe to you for your
product or your
service
• Only have accounts
receivable if you offer
credit
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Inventory
• Product which you
have for sale
• Can be sold within a
year
• Not obsolete
• Not over stocked
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Fixed Assets
• Tangible fixed assets
• Asset is subject to
amortization
• Lasts for longer than
a year and costs
more than $500
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Notes To The Financial Statements
Table 7.3
Notes To The Financial Statements
Fixed Assets:
2015 2015 2015 2014
Cost Accumulated Net Book Net Book
Depreciation Value Value
Tools $10,000 $9,000 $1,000 $1,200
Vehicle $25,000 $20,000 $5,000 $5,800
$35,000 $29,000 $6,000 $7,000
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Liabilities
• Obligations to transfer assets or provide
services to outside parties arising from
events that have already happened
• Classified as current and long term
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INCOME STATEMENT
• This statement shows the revenues and
expenses of the organization and an
amount of profit or loss which has been
earned in the period being reported on
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SAMPLE STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31
2015 2014
Receipts
Grants $59,000 $57,000
Donations $5,078 $2,097
Fees $2,000 $1,458
$66,078 $60,555
Expenditures
Wages $24,300 $20,000
Rent $8,100 $8,000
Program expenses $31,987 $29,874
Office $800 $1,200
Advertising $800 $709
$65,987 $59,783
Excess of receipts over expenditures $91 $772
Net assets at beginning of year $2,772 $2,000
Net assets at end of year $2,863 $2,772
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Revenue
• This is another word
for sales or fees
• Revenue = amount
you charge to other
people for your
product or service
• Grants = funds
received for a specific
purpose
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Expenses
• Expenses are things
that you have to pay
for that are not assets
examples:
• Salaries
• Rent
• Travel
• Advertising
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Budgeting
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Purpose of Budgets
• To motivate employees to perform
• To evaluate employees performance
against the budgets goals
• An aid in making and coordinating short
range plans
• A device for communicating plans to the
employees
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Operational Budgeting
• Annual budget – monthly follow up
• Budget follows the accounting system
• Spending control
• How do you review?
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Reviewing An Operating Budget
• Compare to previous actual results
• Obtain explanations for any differences
from the previous actual results
• Do the assumptions being made appear to
be reasonable?
• Who is responsible?
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ACCOUNTANTS
COMMUNICATIONS
• Notice to Reader
• Review engagement
• Audit
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Tax Returns
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What Do You File?
• T2 – all corporations
• Charity returns
• T4 – if employees
• T1044 – Non Profit return
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Corporate Income Tax Return
• Must pay tax three months after year end
• Return must be filed six months after year
end
• Penalty for late filing is 6% of unpaid tax
for first month increases by 1% per month
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Harmonized Sales Tax
• Tax is levied on
purchase
• Vendor collects and
remits the tax
• Rate is 15% in Nova
Scotia
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Do You Have To Register
• The requirement is that
everyone who has more
than $30,000 in taxable
sales in a year must
register
• You are allowed to
register if you sell less
• If you register, you must
charge the tax
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Three Types Of Sales
• Taxable sales, tax is charged and input tax
credits are allowed
• Exempt sales, tax is not charged but
therefore no input tax credits are allowed
• Zero rated sales, no tax is charged but
input tax credits are allowed
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9 Steps to Reviewing Financial
Statements
• Does the balance sheet
balance?
• Is retained earnings
consistent?
• Does the entity have any
cash?
• Does the entity have any
equity?
• More current assets than
current liabilities?
• How is the entity
financed?
• Have they made any
money?
• Do any of the expenses
appear unusually large or
small?
• Are there any expenses
you expect to see and
you don’t?
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Agenda
• Financial literacy for board members:
Financial statements
Budgeting
Generally accepted accounting principles
Corporate income tax
Harmonized sales tax
Internal controls
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Debi J. Peverill CA
• (902) 468-1414
• 206-15 Dartmouth Road
• Bedford, NS, B4A 3X6