Question

Under current accounting and reporting standards, nongovernmental, not-for-profit organizations must utilize the fund accounting structure set forth in the AICPA Audit and Accounting Guide Not-for-Profit Entities. True or False?

1) True
2) False

Answer 1

The statement is false. Nongovernmental, not-for-profit organizations follow the Financial Accounting Standards Board (FASB) guidelines, not the AICPA guide, for financial reporting.

Step-by-step explanation:

The statement that nongovernmental, not-for-profit organizations must utilize the fund accounting structure set forth in the AICPA Audit and Accounting Guide Not-for-Profit Entities is False. Non-profit organizations are indeed set up to pursue various missions including charitable, religious, or educational purposes, but the specific accounting requirements are provided by the Financial Accounting Standards Board (FASB). FASB's Accounting Standards Codification (ASC) provides the guidelines for financial reporting for non-profit organizations. Under these guidelines, non-profits are required to present their financial statements in a way that shows their net assets are classified into three categories: without donor restrictions, with donor restrictions, and permanently restricted. This aligns more with a net asset approach rather than a traditional fund accounting structure.