Hello, I am responding to questions taken from chapters 5, 6, 7, and 8 of the book Budgeting and Financial Management for Nonprofit Organizations, by A., Weikart Lynne.

Could you please help me provide a response to questions 1,2, 4, 5 and 6?

Also, would you help me edit the response that I have given to the other questions?

Here are the questions Chapters 5, 6, 7, 8 1. Why are principles of accounting so important? 2. Give an example of cash accounting, accrual accounting and modified accrual accounting. 3. What is the difference between current and long-term assets? Why is this important? 4. Why is it necessary to distinguish between current and long-term liabilities? 5. Why are financial ratios useful in financial analysis? 6. Why does profitability matter to non-profits? The submission of the quiz should be in the dropbox below. The submission can be handed in using Microsoft Word/Excel or in Adobe .pdf formats. Multiple files will be accepted, however will need to clearly marked as to which question is being answered.

Where are my responses

1. Why are principles of accounting so important?

2. Give an example of cash accounting, accrual accounting and modified accrual accounting.

Case Accounting

• In a non-profit organization, cash accounting is used to account for every transaction that occurs whenever cash is received or spent.
• Revenues are recorded in the period they are received, and expenses are recorded in the period they are paid. Cash accounting is shown by invoices that are sent or received but do not appear in the income and expenses section of the financial manager's report.
• Most small businesses utilize cash accounting, recognizing revenue when it is received and expenses when they are paid. The best way to explain this method is to understand that cash receipts are similar to revenues, and cash payments are similar to expenses.

Accrual Accounting

• Most businesses and nonprofits use accrual accounting to recognize expenses when they are incurred and revenue when it is earned.
• Actual accounting records the impact of financial transactions that occur without the exchange of cash.
• Unlike cash accounting, accrual accounting requires revenues to be recognized when they are earned and expenses to be recognized when the associated benefits are received.

Modified Accrual Accounting

• Government entities primarily use the modified accrual accounting method to account for revenue when it becomes available and measurable, as opposed to when it is earned.
• In cases where revenue may not materialize, an accounting method is crucial for assisting governments in making policy decisions.

3. What is the difference between current and long-term assets? Why is this important?

Current Assets

• The resources that an organization owns or controls are its assets.
• In the textbook example (Table 6.1), "short-term" or "current assets" are included in two distinct categories. The first category includes cash, marketable securities, and accounts receivable. The second category consists of accounts receivable, inventory of supplies, and prepaid expenses.
• Examples of current assets include cash and other things that can be turned into cash.

Long-Term Assets

• Long-term assets, which are also called fixed or capital assets, are things that a company plans to use, replace, or turn into cash after the normal 12-month operating cycle.
• A nonprofit's long-term assets include property, equipment, and long-term investments in property and equipment.
• Long-term and/or fixed assets are assets that cannot be quickly converted to cash.

Could you please help explain the difference and why it's important?

4. Why is it necessary to distinguish between current and long-term liabilities?

5. Why are financial ratios useful in financial analysis?

6. Why does profitability matter to non-profits?