Question

Under FASB standards, expenses of a not-for-profit organization can only be shown as reductions of unrestricted net assets. How are expenses typically presented?

Option 1: As increases in restricted net assets
Option 2: As reductions of temporarily restricted net assets
Option 3: As reductions of permanently restricted net assets
Option 4: As reductions of unrestricted net assets

Answer 1

Expenses for not-for-profit organizations under FASB standards are presented as reductions of unrestricted net assets, which is Option 4 in the given choices.

Step-by-step explanation:

Under FASB standards, the expenses of a not-for-profit organization are typically presented as reductions of unrestricted net assets. Therefore, the correct presentation of expenses in a not-for-profit organization's financial statements is Option 4: As reductions of unrestricted net assets. It is important to note that expenses cannot be reported as increases in restricted net assets, or as reductions of temporarily or permanently restricted net assets, because those classifications of net assets are reserved for specific purposes defined by donors or grantors.