Reference no: EM13600855

Funds are separate fiscal and accounting entities, each with its own self-balancing set of accounts.

The newly established Society for Ethical Teachings maintains two funds - a general fund for operations and a building fund to accumulate resources for a new building. In its first year it engaged in the following transactions:

1. It received cash contributions of $200,000, of which $40,000 were restricted to the acquisition of the new building.

2. It incurred operating costs of $130,000, of which it paid $120,000 in cash.

3. It earned $3,000 of interest (the entire amount received in cash) on resources restricted to the acquisition of the new building.

4. It transferred $17,000 from the operating fund to the new building fund.

5. It paid $12,000 in fees (accounted for as expenses) to an architect to draw up plans for the new building.

Q(a). Prepare journal entries to record the transactions. Be certain to indicate the fund in which they would be made.

Q(b). Prepare a statement of revenues, expenses, and other changes in fund balance and a balance sheet. Use a two-column format, one column for each of the funds. Note that for purposes of external reporting not-for-profits would not generally prepare statements on a fund basis. Instead, consistent with the requirements of the FASB, they would consolidate their funds into three categories of restrictiveness: unrestricted, temporarily restricted and permanently restricted.