Non Profit Financial Literacy

Transcription

1 Non Profit Financial Literacy Debi J. Peverill Workshop 2

2 Agenda Financial literacy for non profits: Financial statements Budgeting Corporate income tax Harmonized sales tax

3 FINANCIAL STATEMENTS Balance Sheet Income statement

4 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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6 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. Balance Sheet

7 SAMPLE STATEMENT OF NET ASSETS December 31,2015 ASSETS 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

8 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

9 Money in the Bank - Cash The best type of asset to have Very liquid Easy to write cheques when you have cash

10 Accounts Receivable Amounts your customers or funders owe to you for your product or your service Only have accounts receivable if you offer credit

11 Inventory Product which you have for sale Can be sold within a year Not obsolete Not over stocked

12 Fixed Assets Tangible fixed assets Asset is subject to amortization Lasts for longer than a year and costs more than $500

13 Notes To The Financial Statements Table 7.3 Notes To The Financial Statements Fixed Assets: 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

14 Liabilities Obligations to transfer assets or provide services to outside parties arising from events that have already happened Classified as current and long term

15 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

16 SAMPLE STATEMENT OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31 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

17 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

18 Expenses Expenses are things that you have to pay for that are not assets examples: Salaries Rent Travel Advertising

19 Budgeting

20 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

21 Operational Budgeting Annual budget monthly follow up Budget follows the accounting system Spending control How do you review?

22 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?

23 ACCOUNTANTS COMMUNICATIONS Notice to Reader Review engagement Audit

24 Tax Returns

25 What Do You File? T2 all corporations Charity returns T4 if employees T1044 Non Profit return

26 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

27 Harmonized Sales Tax Tax is levied on purchase Vendor collects and remits the tax Rate is 15% in Nova Scotia

28 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

29 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

30 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?

31 Agenda Financial literacy for board members: Financial statements Budgeting Generally accepted accounting principles Corporate income tax Harmonized sales tax Internal controls

32 Debi J. Peverill CA (902) Dartmouth Road Bedford, NS, B4A 3X6 www. DebiPeverill.ca