surplus or deficit
A board member has raised a question. We are showing surpus of $11,900...but that's due mostly to a grant for an event next yer. there is no legal agreement that we must even the event. If the grant is excluded, there would be a deficit in 2001....meaning the board has eaten into reserves and may make it more difficult to oeprate in 2002.
DID THE ASSOCIATION HAVE EXCESS OR DEFICIT?
© BrainMass Inc. brainmass.com December 24, 2021, 4:49 pm ad1c9bdddfhttps://brainmass.com/business/accounting/surplus-deficit-fundamentals-9540
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Hi There,
It all depends on when the organization chooses to record the receipt of the grant revenue. According to generally accepted accounting principles (GAAP), an item is considered to be revenue if the following 4 criteria have been satisfied:
1. The revenue has been earned.
2. The expense that was undertaken to incur the revenue has occured in the same time period.
3. Collection of the funds are reasonably assured.
4. The amount of revenue can be reasonably measured.
Based on the information that you provided, it appears that the actual activity that the grant is relating to will not take place until the following year. Given this information, I would have to say that according to GAAP, the revenue should be recognized in the subsequent year and in the current year, the association would have a deficit.
Please see the attached Word document for further info.
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© BrainMass Inc. brainmass.com December 24, 2021, 4:49 pm ad1c9bdddf>https://brainmass.com/business/accounting/surplus-deficit-fundamentals-9540