Nonprofit Bookkeeping Test
This 21-question quiz samples from general bookkeeping knowledge as well as nonprofit bookkeeping and compliance matters. Use this assessment test as part of your hiring toolkit as well as for identifying staff training needs.
Article Highlights:
- The Nonprofit Bookkeeping Assessment Test
- 1. Which of the following regarding the Statement of Financial Position is true?
- 2. Under the accrual method of accounting, a donor pledge that is supported by verifiable documentation is recorded in the period the pledge is made.
- 3. Which of the following are typically included in the bank account reconciliation?
- 4. Which of the following is included in the Statement of Activities?
- 5. Which of the following is an example of a source document?
- 6. Costs of operating a vehicle for both program services and organization management should be included within which functional expense category?
- 7. Which of the following is an example of an indirect cost that should be shared among functional expense categories?
- 8. In December 2010, organization X, a nonprofit using a calendar fiscal year, received a grant of $10,000 with donor instructions that it is to be used for general operations in 2011. In which category of support should the grant be classified on X’s Statement of Activities for the year ending December 31, 2010?
- 9. Which of the following statements regarding a trial balance is true?
- 10. Which of the following should be charged to an expense account?
- 11. One of the following statements regarding the chart of accounts is true. Which one is it?
- 12. All of the following statements about a contribution confirmation needed by a donor for tax reporting are correct except:
- 13. Within which functional expense category should legal and accounting fees be classified?
- 14. When possible, which of the following duties should NOT be performed by the bookkeeper, but should be done by someone else?
- 15. Which of the following sources of income are classified as a contribution (donation)?
- 16. Which of the following is an example of a poor internal control practice?
- 17. A donation of non-cash property is recorded at which of the following values?
- 18. Which of the following is not an example of an expense account?
- 19. The balance of loans and other liabilities are presented on which of the following financial statements?
- 20. Which of the following statements about the IRS form 990 series is true?
- 21. Hands-on math: Please add the following dollar amounts and provide the correct total (provide a calculator or adding machine):
- Scoring
- Answer Sheet
- Answers
- Training resources
If you’re not an accountant yourself, it can be hard to hire a qualified bookkeeper. How can you tell if an applicant really knows bookkeeping? CPA Dennis Walsh created this terrific assessment test you can give candidates for bookkeeping and accounting jobs. We especially like the chart at the end that shows what training is called for based on which questions were answered correctly or incorrectly.
We recommend that you give an applicant 20 minutes to complete the assessment test. The ability to make accurate choices under time pressure is an important indicator of suitability for this type of work.
The Nonprofit Bookkeeping Assessment Test
1. Which of the following regarding the Statement of Financial Position is true?
a) It is also known as a balance sheet
b) It typically covers a one-year period
c) It includes expenses by functional category
d) Both a and b
2. Under the accrual method of accounting, a donor pledge that is supported by verifiable documentation is recorded in the period the pledge is made.
a) True
b) False
3. Which of the following are typically included in the bank account reconciliation?
a) Bank service charges
b) Outstanding checks
c) Deposits in transit
d) All of the above
4. Which of the following is included in the Statement of Activities?
a) Total fundraising expenses
b) Cash in bank
c) Cash flows from investing activities
d) None of the above
5. Which of the following is an example of a source document?
a) Volunteer time sheet
b) Purchase order
c) Donor pledge card
d) All of the above
6. Costs of operating a vehicle for both program services and organization management should be included within which functional expense category?
a) Program services
b) Management & general
c) Allocate between program services and management & general on a reasonable basis
d) Fundraising
7. Which of the following is an example of an indirect cost that should be shared among functional expense categories?
a) Salary and benefits of the executive director who spends time on program, management, and fundraising duties
b) An information packet to be distributed to program recipients
c) Costs of producing a brochure advertising the annual fundraising dinner
d) Costs of lunch for a board meeting
8. In December 2010, organization X, a nonprofit using a calendar fiscal year, received a grant of $10,000 with donor instructions that it is to be used for general operations in 2011. In which category of support should the grant be classified on X’s Statement of Activities for the year ending December 31, 2010?
a) Unrestricted contributions
b) Temporarily restricted contributions
c) Permanently restricted contributions
d) The grant funds should be reported as deferred revenue liability in the December 2010 financial statements and reclassified as an unrestricted contribution in 2011
9. Which of the following statements regarding a trial balance is true?
a) A trial balance must be prepared by a CPA
b) A trial balance is the last item performed in the bookkeeping cycle
c) A trial balance assures that the general ledger is in balance before creating any adjusting entries needed for financial statement preparation
d) None of the above
10. Which of the following should be charged to an expense account?
a) Purchase of a small lot for parking
b) Purchase of an office computer
c) Replacement of a paratransit van engine and transmission
d) None of the above
11. One of the following statements regarding the chart of accounts is true. Which one is it?
a) Accounts are listed in alphabetical order
b) A properly designed chart of accounts helps assure appropriate and consistent classification of transactions
c) Designing the chart of accounts does not require any specialized accounting knowledge
d) A chart of accounts is not necessary with most software-based bookkeeping systems
12. All of the following statements about a contribution confirmation needed by a donor for tax reporting are correct except:
a) It may be sent by email
b) It should include the donor’s name, address, and separately list any single contribution of $250 or more
c) It must be sent by January 31 of the following year
d) It must state whether any goods or services were provided in exchange for the donation
13. Within which functional expense category should legal and accounting fees be classified?
a) Program services
b) Management & general
c) Fundraising
d) Allocate to each of the above categories on a reasonable basis
14. When possible, which of the following duties should NOT be performed by the bookkeeper, but should be done by someone else?
a) Preparing a purchase order
b) Approving an invoice for payment
c) Receiving a delivery of goods
d) All of the above
15. Which of the following sources of income are classified as a contribution (donation)?
a) A gift accompanied by restrictions as to its use
b) Program service revenue
c) Interest income
d) None of the above
16. Which of the following is an example of a poor internal control practice?
a) The bookkeeper stamps checks received with a restrictive endorsement at the time the bank deposit is prepared
b) The monthly bank account reconciliation is performed by the board treasurer
c) Checks must be signed by both the bookkeeper and treasurer
d) Both a and c
17. A donation of non-cash property is recorded at which of the following values?
a) The amount the donor paid for the property
b) The current fair market value of the property
c) Donations of non-cash property are not recorded on the books
d) Either a or b
18. Which of the following is not an example of an expense account?
a) Office supplies
b) Accounts payable
c) Depreciation
d) Bad debts
19. The balance of loans and other liabilities are presented on which of the following financial statements?
a) Statement of cash flows
b) Statement of activities
c) Statement of financial position
d) Statement of functional expenses
20. Which of the following statements about the IRS form 990 series is true?
a) The Form 990-N e-Postcard may be used by organizations with less than $50,000 of gross income
b) If the organization fails to file an appropriate form 990 for 3 consecutive years, it will automatically lose its tax-exempt status
c) Form 990 must be made available for public inspection
d) All of the above
21. Hands-on math: Please add the following dollar amounts and provide the correct total (provide a calculator or adding machine):
64.15
10,211.19
5.66
1,344,991.04
176.76
898.98
454.19
71.11
44,231.12
96,454.89
156.11
789.43
700.10
2,001,565.32
Scoring
It’s not possible for any 21-question quiz to guarantee competency as a nonprofit bookkeeper. This is not attainable in a 21-question test. The quiz is deliberately short so that it doesn’t require a good deal of time for quiz takers, for scorers, or for comparing results among individuals.
That said, this is not an easy quiz and completion within 20 minutes with a score of 75% or better (16 correct) likely indicates that the individual has sufficient knowledge to perform most bookkeeping duties for a typical nonprofit. However, the quiz cannot test a person’s ability to apply such knowledge in a work setting.
Remember that not all questions have the same weight. Look less at the total score than to see which questions were answered correctly. The grid below may give you additional insight about areas where training is needed. A lower score for nonprofit bookkeeping relative to general bookkeeping may indicate a need for training in nonprofit accounting issues.
In addition, we have highlighted revenue recognition and functional expenses in particular. These present unique issues for nonprofits and represent a high incidence of financial statement error and omission. Mark each blue-shaded field for which the corresponding question was answered correctly, and then total the correct number of responses for each column.
Answer Sheet
| Question | Correct answer | Answer given | Overall knowledge | General bookkeeping knowledge | Nonprofit bookkeeping knowledge | Revenue recognition | Functional expenses |
|---|---|---|---|---|---|---|---|
| 1 | a | ✔ | ✔ | ||||
| 2 | a | ✔ | ✔ | ✔ | |||
| 3 | d | ✔ | ✔ | ||||
| 4 | a | ✔ | ✔ | ||||
| 5 | d | ✔ | ✔ | ||||
| 6 | C | ✔ | ✔ | ✔ | |||
| 7 | a | ✔ | ✔ | ✔ | |||
| 8 | b | ✔ | ✔ | ✔ | |||
| 9 | C | ✔ | ✔ | ||||
| 10 | d | ✔ | ✔ | ||||
| 11 | b | ✔ | ✔ | ||||
| 12 | C | ✔ | ✔ | ||||
| 13 | b | ✔ | ✔ | ✔ | |||
| 14 | d | ✔ | ✔ | ||||
| 15 | a | ✔ | ✔ | ✔ | |||
| 16 | d | ✔ | ✔ | ||||
| 17 | b | ✔ | ✔ | ✔ | |||
| 18 | b | ✔ | ✔ | ||||
| 19 | C | ✔ | ✔ | ||||
| 20 | d | ✔ | ✔ | ||||
| 21 | $3,500,770.05 | ✔ | |||||
| Total Correct | |||||||
| Total Category | 21 | 10 | 10 | 4 | 3 |
Answers
1) a is correct. The statement of financial position, also known as a balance sheet, is a “snapshot” of the organization’s assets, liabilities, and net assets as of a specific date. By contrast, the other nonprofit financial statements report activity covering a period of time.
2) a is correct. Under the accrual method, a donor pledge is recorded at the time the pledge is made, assuming that it represents an unconditional promise to give and is adequately documented.
3) d is correct. These are the most common items of adjustment on the bank account reconciliation.
4) a is correct. The statement of activities reports revenue and expenses, including expense totals for the functional categories program services, management & general, and fundraising. Membership organizations often use a fourth functional expense category for member development costs. The statement of activities is the nonprofit equivalent of a profit and loss statement. Cash in bank is reported on the statement of financial position, also known as a balance sheet. “Cash flows from investing activities” is reported on the statement of cash flows.
5) d is correct. A source document is the evidence that supports creation of a bookkeeping entry.
6) c is correct. Such costs can be reasonably related to both program and management activities and should be consistently allocated based on an appropriate “cost driver” such as a mileage log or hours of use.
7) a is correct. An executive director typically spends some amount of time in program, management, and fundraising functions. Costs relating to this position would therefore be allocated among these areas on a rational and consistent basis, usually on relative time spent. The other costs are all examples of direct costs to be fully assigned to the respective functional class.
8) b is correct. The grant is accompanied by a donor-imposed time restriction requiring that the funds be used in 2011 and should be classified as temporarily restricted revenue on the statement of activities for the year-ended December 31, 2010.
9) c is correct. Answer c accurately describes a purpose of trial balance preparation as part of the bookkeeping cycle.
10) d is correct. All of the answers are examples of common capital expenditures. Repairs of a major nature that result in an increased to the asset value or extends the life of an asset, such as the replacement of a van engine and transmission, should generally be capitalized as an addition to the asset cost and depreciated over the remaining useful life.
11) b is correct. A sound bookkeeping system starts with a properly designed chart of accounts regardless of whether the system is manual or computerized. Accounts are listed in the order of financial statement presentation. It is important that a nonprofit chart of accounts be designed by someone skilled in nonprofit accounting.
12) c is correct. While it is generally best to send this information no later than January 31 of the year following the contribution, there is no specific due date. A donor may obtain this information at any time prior to filing his or her tax return. Many nonprofits prefer to acknowledge contributions at the time of receipt.
13) b is correct. Expenses that are not for fundraising activities and that cannot be directly or indirectly associated with any program activity fall into the management & general category of functional expenses. Costs such as legal fees, accounting, board meeting expenses, and a portion of the executive director’s salary are common examples.
14) d is correct. A basic objective for good internal control is to segregate duties involving authorization of transactions, bookkeeping, independent reconciliation, and access to assets. Small nonprofits tend to be challenged in segregating duties because of inadequate staffing and board members may need to assist with some key control duties. Preparing a purchase order or approving an invoice for payment are authorization functions that are incompatible with recordkeeping. Similarly, receiving a delivery of goods involves access to assets by a person involved in the bookkeeping functions of recording purchase and inventory transactions.
15) a is correct. A gift, even if accompanied by a donor-imposed restriction, is nevertheless reported as a contribution. Contributions reported on the face of the statement of activities must be separated into unrestricted, temporarily restricted, and permanently restricted categories. Program service revenue represents an exchange for the performance of services and is therefore not a contribution.
16) d is correct. Checks should receive restrictive endorsement at the time received, not at the time the deposit is prepared. The bookkeeper should not be handling cash received or preparing the deposit. Also, the bookkeeper should not have access to the checking account and this practice defeats the benefit of a second signature requirement. In contrast, preparation of the bank account reconciliation by the treasurer provides for reconciliation by someone independent of cash handling functions.
17) b is correct. Under generally accepted accounting principles (GAAP), non-cash contributions are recorded at their fair market value as of the time received.
18) b is correct. Accounts payable represents the total balance of unpaid amounts to vendors and other creditors as of the statement of financial position date. Under accrual accounting, amounts included in the accounts payable balance are recognized in the appropriate expense account in the period the expense is incurred.
19) c is correct. The statement of financial position includes liabilities of the organization as of the report date.
20) d is correct. IRS Form 990-N, known as the “e-Postcard,” is an online information return that may only be filed by organizations with less than $50,000 of gross income. An organization that qualifies to file Form 990-N may choose instead to file Form 990-EZ or the longer Form 990 if it wishes to provide more information about its activities, finances, and governance. Failure to file an appropriate Form 990 for 3 consecutive years will result in automatic revocation of tax-exempt status. Form 990 must also be made available for public inspection.
21) Total should be $3,500,770.05
Training resources
For nonprofit bookkeeping training, consider the following resources:
- Local community colleges are often a great place to obtain basic accounting and bookkeeping training without having to enter into a degree program. It’s less likely that they’ll have nonprofit-specific classes, but under supervision of an experienced nonprofit accountant, a person with generic bookkeeping skills can learn quickly.
- Many nonprofit technical assistance providers and nonprofit associations sponsor workshops, link to training resources from their websites, and sell training materials through an online bookstore. Ask your local community foundation or United Way for your local nonprofit providers.
- The American Institute of Certified Public Accountants and state CPA societies sponsor self-study and live seminar resources on a variety of nonprofit financial management topics.
- And of course, Blue Avocado.
See also:
- How to Hire a Great Accountant for Your Nonprofit
- A Board-Staff Agreement for Financial Accountability
- Seven Ways to Reduce Your Audit Costs
Editor’s note: We couldn’t get Dennis to include this question, so we’re testing you here: In what movie does Cher play a bookkeeper?
You might also like:
- Five Internal Controls for the Very Small Nonprofit
- A Nonprofit Partnership: How One Board Member Connected Two Organizations and Boosted Both
- Innovative Leadership — Culture Doesn’t Have to Eat Strategy: Tending to Human Factors During Strategic Planning
- Treasurers of All-Volunteer Organizations: Eight Key Responsibilities
- Insider Newsletters: An Easy Way to Keep Your Board in the Loop and Engaged
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About the Author
Dennis Walsh, CPA, volunteers his post-retirement time helping North Carolina nonprofits with accounting concerns, work for which he received the Community Service Award from the Guilford Nonprofit Consortium. He shares his expertise nationally with nonprofits through Blue Avocado. He has also published “Legal & Tax Issues for North Carolina Nonprofits” and Man From Macedonia, a memoir by civil rights leader Aaron Johnson. Dennis also authored the Blue Avocado article Nonprofit Bookkeeping Test, which is one of the ten most viewed Blue Avocado articles of all time. A version of this article was published by the Planned Giving Design Center.
Articles on Blue Avocado do not provide legal representation or legal advice and should not be used as a substitute for advice or legal counsel. Blue Avocado provides space for the nonprofit sector to express new ideas. The opinions and views expressed in this article are solely those of the authors. They do not purport to reflect or imply the opinions or views of Blue Avocado, its publisher, or affiliated organizations. Blue Avocado, its publisher, and affiliated organizations are not liable for website visitors’ use of the content on Blue Avocado nor for visitors’ decisions about using the Blue Avocado website.
Thank you very much.
Thank you very much.
Dennis,
A great resource for board members and executives looking to hire an accountant. It is an interesting challenge to hire an expert when you don’t have the expertise to evaluate their expertise. This goes a long way toward making sure the person can handle the job.
Steve Zimmerman
Thank you Steve. And thanks for your great feedback during development.
Thank you for such valuable content!
How timely issue #59 of Blue Avocado is! Our current bookkeeper is getting ready to drastically scale back hours at a time when the role is growing, and we need to find suitable help in that area. The Nonprofit Bookkeeping Assessment Test will be a big help in screening applicants. Could we please get the Answer/Explanation Sheet and Scoring Guide?
Please send the Answer/Explanation Sheet, along with a Scoring Guide and list of training resources, related to your quiz for testing accountant applicants. Thanks for providing such useful information in your newsletters. Cheers!
Please send the Answer/Explanation Sheet, along with a Scoring Guide and list of training resources, related to your quiz for testing accountant applicants. Thanks for providing such useful information in your newsletters. Cheers!
Business Manager at Catholic Youth Camp. Please send a copy of the answer sheet for the bookkeeping quiz. Thanks. Keep up the great work, Julie
Please send the non-orofit bookkeeping test’s Answer/Explanation Sheet, along with a Scoring Guide and list of training resources to me. Blue Avocado has been a tremendous resource! thanks
Please send the non-orofit bookkeeping test’s Answer/Explanation Sheet, along with a Scoring Guide and list of training resources to me. Blue Avocado has been a tremendous resource! thanks
Please email me the answers to the bookkeeping test. It is excellent!
Please email me the answers to the bookkeeping test. It is excellent!
Please email me the answer sheet for the nonprofit bookkeeping test. I thought the test was very well done. My contact information is below. Thanks, Lisa
I would like to request a copy of the answer sheet to the Nonprofit Bookkeeping test published December 26th Thank you, and thanks for the great article.
Dear Editor, Thank you so much for publishing this test – I plan to incorporate it into our financial standards and procedures. Of course, to do so, I will need the answers and additional information.
Thank you for a wonderfully informative website – especially for those of us who still feel new to the nonprofit world.
I am writing to request the answers, etc. for the bookkeeping quiz. Here is the information you requested: (omitted for publication) This is really a fantastic tool, thanks so much! Andrea
Dear Editor, Please send a copy of the Nonprofit Bookkeeper Assessment scoring sheet/guide as referenced in the latest Blue Avocado newsletter. I work with several nonprofit organizations (small history museums) that I know will benefit from this information. As always, this was a great issue. I didn’t even know there was such a thing as foundation affinity groups! Many thanks, Carlyn
What a great tool!
I really enjoyed the nonprofit bookkeeping test and would like the answers/explanation sheet, scoring guide, etc. Thanks, Jane
This is great. I am going to take the test to see how I would do. It will also help me hire my next bookkeeper. Thank you.
Thank you, Blue Avocado friends, for this excellent CPA acumen assessment. This is a great resource! My organization has a wonderful bookkeeper, but I work with other groups who I hope will make use of this assessment soon. I’d appreciate a scoring guide and answer key, sent to my emai if possible. A fabulous and insightful – and super useful – tool from Blue Avocado. Thanks! -Lauren
Could I get the answers to the accounting quiz? We’ve recently switched to the accrual method so I’m anxious to see how my knowledge holds up with reality. David
Bookkeeper for nonprofit, former Accounts and Budget Manager for EWB-USA. Well done. Would like to see questions about audit procedures and more control deficiencies….
Thanks for that awesome accounting test! Please send me the answers. Take care, Laura
May I get an answer sheet for the Nonprofit Bookkeeping test. I had always used a short calculator test, and a Quickbook test – this is much more thorough. Thanks
Thank you for this. I wish I’d had it before I hired the bookkeeper I have just fired. Barbara
Please send me the answers to this accounting quiz. I desparately needed this a few months ago and will now save it for the next time I need it. I really enjoy Blue Avocado, but this is unbelievably helpful to a CEO who is a social worker by training. Mahalo Hauoli Makahiki Hou
Please send me the answers to this accounting quiz. I desparately needed this a few months ago and will now save it for the next time I need it. I really enjoy Blue Avocado, but this is unbelievably helpful to a CEO who is a social worker by training. Mahalo Hauoli Makahiki Hou
Regarding the Nonprofit Bookkeeping Test, I’d appreciate a copy of the answer and explanation sheet and supplemental material. Now that I’ve taken the test, I would like to see if I missed any (or how many I missed), but in addition, I’ve forwarded the test to our Director of Finance who would be hiring any new accounting/bookkeeping personnel. I think the test is a good way to assess one’s understanding of the accounts and how some transactions should be handled. I am Treasurer and Board Member of A Better Way.
Thanks for this informative article. We are in transition from "check writer" to "bookkeeper" and this should help us separate the two areas of responsibility. Look forward to receiving the answers to the test —
Thanks heaps for this – it looks easily adaptable to Australian accounting systems and legislation. Happy 2011 to all at Blue Avocado from one of your Aussie fans 🙂 Cheers Gigi
As of today we have more than 200 requests for the answer sheet, so clearly Dennis’ test has struck a chord. And a big congratulations to Regenia Bailey of Iowa City for being the first person to answer the question correctly about the movie in which Cher played a bookkeeper . . . Moonstruck!
As of today we have more than 200 requests for the answer sheet, so clearly Dennis’ test has struck a chord. And a big congratulations to Regenia Bailey of Iowa City for being the first person to answer the question correctly about the movie in which Cher played a bookkeeper . . . Moonstruck!
THANK YOU! Thanks for a great newsletter. I have yet to see an issue that does not include something of value — Love those 3 minute vacations too! Alice
Love this Bookkeeping Test. Please send me the answer sheet and any related material. Thank you so much for all the valuable information in Blue Advocado. Happy New Year!
Love this Bookkeeping Test. Please send me the answer sheet and any related material. Thank you so much for all the valuable information in Blue Advocado. Happy New Year!
Chiming in with all the former comment’ers please forward me the answer and scoring sheet….we made up a test similar to this possibly 6 years ago and were totaly ready to hire a lovely person who had all the related skills we required in the job but, upon reviewing his responses to our CPA composed test we found the applicant failed the test big time! Was a real eye opener and stopped the interview/hiring dead in its tracks! Would love to also have this test in our tool bag for future use. Thank you greatly! Carolyn Moore Executive Director Island Coast AIDS Network (ICAN) Ft. Myers, FL 33901
This is a brilliant tool.
Hi everyone! This is posted by Susan Sanow. I have responded to ALL your requests on behalf of Blue Avocado. It has been a pleasure sharing such a valuable document with all who are interested. I have been most impressed with the many more ways you are using the document. While it was intended to use for prospective bookkeepers, our readers will be using it in other ways, Some are using it to evaluate their own knowledge. Some want to evaluate their current bookkeeping staff and others have indicated an interest in using as an educational tool for their non-financial staff AND for board members! The test has been requested by executive directors, board members, free-lance bookkeepers, consultants and CPAs have taken advantage of this, too! Requests have come from all over the United State, some in Canada … and a very strong interest from Australia. Who knew?
You made a huge difference for me in my hiring process. Thank you for
the answers to the test. You are amazing.
Sue L.
Director of Finance
Mountlake Terrace, Washington
I am the GC for a small non-profit and head of the audit Committee. I am sure this will be useful to improve my knowledge and the knowledge of the volunteer Treasurer who keeps the books.
Perhaps you can answer a question for me. I am not familiar with the terms "Statement of Financial Position"( Question #1) and "Statement of Activities." (Question # 4) I see in the answer sheet that these terms apply to the "Balance Sheet" and "Profit and Loss Statement". This organization, ( the RB Chorale, Inc which is a 501(c)3 corp and carries your insurance ) has an annual gross income between $50K -$100K and keeps its books on a cash basis in Quicken. Our taxes are filed on IRS form 990-EZ. Using Quicken, we generate and use for management a P & L statement, but don't generate or see the need for a Balance Sheet. We try to keep things simple, but are we missing something?
Bruce
If you want to seek grants in the future, then prepare Form 990 (not N or EZ) and post it to GuideStar. Do this every year, and fill in all the other GuideStar information too. That will make your chorale seem like a well run NPO to any grantmaker. Dave.
Dear Mr. Bean,
Thanks for your interest in the bookkeeper test. It’s been well received and I hope you have found it helpful.
One of the objectives of the quiz was to provide accompanying explanations of the answers that help educate persons about the unique aspects of nonprofit accounting. A good case in point is your recognition of the statement of activities as the nonprofit equivalent of a business p&l statement. Unfortunately, off the shelf accounting software does not consider such differences and more importantly do not facilitate the special financial statement presentation issues of nonprofit activities. That said, in the situation you describe, you’re probably just fine using a simple p&l format to monitor your revenues and expenses. Of course, comparison with your budget is very important. And if your board does not feel a statement of financial position, a/k/a balance sheet is needed for your internal use, then that’s certainly fine also. If you’re only substantial asset is your cash account you can probably get what you need from review of the monthly bank account reconciliation.
I should mention that if you are preparing a Form 990-EZ then you actually are preparing a balance sheet in the relevant section of that form. I hope this reply is of help.
All the best in your worthy work, Dennis Walsh
Thank you SO much for this service. I've been volunteering bookkeeping for local, very small, community organizations for 15 years now – farmers market, garden club, Buddhist meditation center, etc. (Our whole county's population is only 12,000 and we're the second poorest in the state most years. So there are not a lot of extra professionals around to meet this need.) I've been using Quicken for 20 years and Quickbooks for 10, after a 20 year professional life of teaching record keeping and taxes to farm families – not to mention designing record keeping systems for a variety of businesses. So, while I'm not a professional I've felt pretty competent. Our educational recycling center has big dreams and gone all the way – incorporating and achieving it's 501(c)(3) status. None of our local CPA's will touch nonprofit stuff because it's "too difficult." So, I've read as much as I can, especially with reference to IRS reporting requirements, GAAP rules, etc.. It was a case of there wasn't anyone else to help out an organization with a meager budget of $100-$1000 a year! However, the recycling center is now getting involved in a couple of $1,000 grants (one Federal) which require more professional-looking statements that a spreadsheet can provide. Thank goodness we've had the audits waived! So, to save time (just print out those pre-formatted reports – ha!) we bought QB Premier Non-Profit from Techsoup. I've been going crazy ever since. It might not be so bad, but I'm trying to track "inventory" since for grant reporting we have to know pounds sold of donated recyclables that are kept out of the landfill. That means using "items" in QB-NP in a way that seems different from what they were meant for. None of the nonprofit references I've found have addressed anything similar to our situation. I was starting to feel very stupid, as if I wasn't a very capable/knowledgeable bookkeeper. I found Blue Avocado while surfing in desperation, waiting for Amazon to ship a copy of Kathy Ivens' book on Running QuickBooks in NonProfits. (I hope it'll be good for something at least! Many of the NP bookkeeping guides seem to be way too basic for my purposes.) Anyway, I was starting to think, "Maybe all those CPA's were right…non-profit IS too difficult." I was beginning to consider using my regular QB, with a nonprofit chart of accounts. That would spoil the whole purpose, however – those darn "looking better" reports. That's when I found Walsh's test for prospective nonprofit bookkeepers. In spite of it's billing, I realize it doesn't really test that much. However, I did very well on the test and it came just at the right time. Doing well on that little test did wonders for my self-esteem and sanity. Now I feel confident again that it'll be possible to solve this puzzle. Keeping the recycling center's records and doing all the financial reports, restricted contributions, activity records, volunteer tracking and grant reporting has been fine without QB up until now, so I know I can do it! I'm not totally ignorant after all, just inexperienced in this particular area. (grin) I'm back to my smiling self again. Thank you for all the other references you provided as well. LOTS of good info, though the article from Walsh on AVO treasurers brought me a time of panic. We've been fund raising and applying for grants to buy a used baler; I'd never heard of the Unified Solicitation Registration before. It took me awhile to wade through the info enough to realize that Missouri doesn't require 501(c)(3)s to register. Whew! Anyway, thank you again for offering this service. I'm looking forward to new articles as they come out.
Tory – you can get an exemption in Missouri, but it is not automatic. You have to submit an exemption request and your IRS Tax determination letter to avoid registrations. If you need MO’s contact info, you can find it and the other state regulator’s contact info here:
http://www.labyrinthinc.com/resources/annual-charitable-state-registrations/charity-state-contacts/
Thank you SO much for this service. I've been volunteering bookkeeping for local, very small, community organizations for 15 years now – farmers market, garden club, Buddhist meditation center, etc. (Our whole county's population is only 12,000 and we're the second poorest in the state most years. So there are not a lot of extra professionals around to meet this need.) I've been using Quicken for 20 years and Quickbooks for 10, after a 20 year professional life of teaching record keeping and taxes to farm families – not to mention designing record keeping systems for a variety of businesses. So, while I'm not a professional I've felt pretty competent. Our educational recycling center has big dreams and gone all the way – incorporating and achieving it's 501(c)(3) status. None of our local CPA's will touch nonprofit stuff because it's "too difficult." So, I've read as much as I can, especially with reference to IRS reporting requirements, GAAP rules, etc.. It was a case of there wasn't anyone else to help out an organization with a meager budget of $100-$1000 a year! However, the recycling center is now getting involved in a couple of $1,000 grants (one Federal) which require more professional-looking statements that a spreadsheet can provide. Thank goodness we've had the audits waived! So, to save time (just print out those pre-formatted reports – ha!) we bought QB Premier Non-Profit from Techsoup. I've been going crazy ever since. It might not be so bad, but I'm trying to track "inventory" since for grant reporting we have to know pounds sold of donated recyclables that are kept out of the landfill. That means using "items" in QB-NP in a way that seems different from what they were meant for. None of the nonprofit references I've found have addressed anything similar to our situation. I was starting to feel very stupid, as if I wasn't a very capable/knowledgeable bookkeeper. I found Blue Avocado while surfing in desperation, waiting for Amazon to ship a copy of Kathy Ivens' book on Running QuickBooks in NonProfits. (I hope it'll be good for something at least! Many of the NP bookkeeping guides seem to be way too basic for my purposes.) Anyway, I was starting to think, "Maybe all those CPA's were right…non-profit IS too difficult." I was beginning to consider using my regular QB, with a nonprofit chart of accounts. That would spoil the whole purpose, however – those darn "looking better" reports. That's when I found Walsh's test for prospective nonprofit bookkeepers. In spite of it's billing, I realize it doesn't really test that much. However, I did very well on the test and it came just at the right time. Doing well on that little test did wonders for my self-esteem and sanity. Now I feel confident again that it'll be possible to solve this puzzle. Keeping the recycling center's records and doing all the financial reports, restricted contributions, activity records, volunteer tracking and grant reporting has been fine without QB up until now, so I know I can do it! I'm not totally ignorant after all, just inexperienced in this particular area. (grin) I'm back to my smiling self again. Thank you for all the other references you provided as well. LOTS of good info, though the article from Walsh on AVO treasurers brought me a time of panic. We've been fund raising and applying for grants to buy a used baler; I'd never heard of the Unified Solicitation Registration before. It took me awhile to wade through the info enough to realize that Missouri doesn't require 501(c)(3)s to register. Whew! Anyway, thank you again for offering this service. I'm looking forward to new articles as they come out.
I thought this was one of the most pertinent, down to the real world way of approaching this subject I've ever seen, and just as a hiring tool, but as a training tool as well. You guys do good work. Thanks, Sheila
Dennis, Awesome work on helping NPO with their accounting needs. I plan to do that myself. I have CPA background and worked in non profits for a few years. Now would be a good time to combine the two and help non profits who will have less contributions due to the economy and might therefore find it difficult to hire full time accountants. Sheela
Dennis, Awesome work on helping NPO with their accounting needs. I plan to do that myself. I have CPA background and worked in non profits for a few years. Now would be a good time to combine the two and help non profits who will have less contributions due to the economy and might therefore find it difficult to hire full time accountants. Sheela
WOW great test here. I just took it myself. This is great for those seeking qualified bookkeepers.
Dennis,
I have e-mailed and followed the link on this site to get the answers to this quiz, but have yet to receive them. I am interviewing candidates next week and hoped to have this ready to give each one for whom we had interest. Is there any other way to get the answers? I’m anxious to see how I did on the test myself!
Stacey Butts
Finance Director
The Sight Center of Northwest Ohio
Thank you so much! We're an office of one staff member (me) and I wear too many hats. At long last I have approval to advertise for and hire an accountant/bookkeeper! This test was a good one for me to take (out of necessity, I've been doing the bookkeeping and accounting for several years but I'm not a bookkeeper or an accountant), and it will help with the search for someone else to take over! Appreciate it very much, and thank you & Blue Avocado for all the informative, educational and helpful articles. Incredibly valuable to our little non-profit.
Hi: Are the answers still available?
If so, how would I be able to access them?
Thanks!
We have now sent the answer sheet to more than 1,500 Blue Avocado readers! So glad that Dennis Walsh's work has been so useful. Jan
Thanks this will be helpful when evaluating job candidates.
Thank You
Just stumbled upon this. Excellent resource. Can I have the answers please? Thank you.
Can I get the answer sheet? This would be great to share with our NFP clients!
I have filled out the form to get the answer sheet but haven’t heard back yet. This is a great resource for those of us hiring Accountants. Thank you! Looking forward to seeing the answers.
Hire a bookkeeping business or a person who does bookkeeping for other organizations (and find out from those organizations what they think of that person). Don’t just hire somebody who seems to know a lot about bookkeeping.
Love this. It’s also a great tool to see if the Board of Directors understands the various financial statements. I’d love to see the key.
Great useful item! We need to keep this on hand for when/if we need to hire a new Bookkeeper or Exec Director. Please send me the answer sheet?
Great useful item! We need to keep this on hand for when/if we need to hire a new Bookkeeper or Exec Director. Please send me the answer sheet?
great info
You can apply book if you want.
Really? https://studymoose.com/university/university-of-chicago ohh