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Accounting for Nonprofit versus for-profit expenditures

1. Prepare, side by side, the correct journal entry for the identical transaction:
a. once for a nonprofit entity
b. once for a for-profit company
2. Include notes for each transaction

Transaction 1: Assume a nonprofit has a restricted fund for capital asset purchases. Compare the journal entries for the cash purchase of a $10,000 computer by the nonprofit, to how the journal entry would look for this for-profit.

Transaction 2: Assume that a nonprofit has a need for $80,000 for a particular new marketing expenditure, and a for-profit entity needs to raise an additional $80,000 to pay for some unanticipated marketing expenses. How would the journal entities look at the acquisition of the funds and the subsequent spending of the funds?

Transaction 3: The for-profit entity sells $120,000 with net 30-day terms, while the nonprofit entity has a fund raising drive for which they receive pledges of $120,000. How do the two journal entries look?

Solution Preview

Transaction 1: Assume a nonprofit has a restricted fund for capital asset purchases. Compare the journal entries for the cash purchase of a $10,000 computer by the nonprofit, to how the journal entry would look for this for-profit.

a. For a nonprofit entity
Capital Fund:
Dr: Computer $10,000
Cr: Cash $10,000
Purchased Computer from the restricted fund for capital asset purchases

b. for a for-profit company:
Dr: Computer $10,000
Cr: Cash $10,000
Purchased Computer ...

Solution Summary

Ex. Purchased Computer from the restricted fund for capital asset purchases
a. For a nonprofit entity
Capital Fund:
Dr: Computer $10,000
Cr: Cash $10,000

b. for a for-profit company:
Dr: Computer $10,000
Cr: Cash $10,000

$2.19