The Importance Of Accounting In Accounting

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Introduction Ever business organization needs to keep detailed financial records to maximize their chances of success. If a company cannot make payroll or pay its expenses it will fail. Much has been made of nonprofits behaving more like for profit organizations in the recent past; however, in accounting, the nonprofits financial records cannot and should not be like most for profit businesses. The chart of accounts is the critical first step in a nonprofit’s accounting system (Scarano, 2016). This paper will look at the purpose of a part of the nonprofit accounting system, the chart of accounts, focusing on the purpose, importance, use, and audience. Background and Purpose The Statement of Financial Accounting Standards No. 117 as promulgated…show more content…
A 2010 article in the American Journal of Evaluation, financial reporting (together with human resource reports, turnover reports, and recruitment reports) was an integral part of how the board and senior management evaluated the operations of the nonprofits. They also found that these reports final evaluations, when incorporated into their annual reports, could be used to educate funders, elected officials, and other stakeholders about their accomplishments as well as serve as a marketing tool (Joanne G. Carman, 2009). Furthermore, usable reports based on a solid chart of accounts allow the Board to get a clear picture as to the organizations income portfolio. An income portfolio is the organization’s mix of income sources or streams which can be used by the nonprofit’s leadership under one or more of the evaluation methodologies available (Young, 2007, pp. 291-292). The financial reporting based on the chart of accounts is also used by external sources such as Guide Star, Charity Navigator, and the media, when rating the charity as well as external entities when deciding between nonprofits for…show more content…
N. (1995). The Nonprofit Accounting Mess. Accounting Horizons, 9(2), 44-53. Betty Jane Richmond, L. M. (2003). Social Accounting for Nonprofits Two Model. Nonprofit Management & Leadership, 13(4), 308-324. Board, F. A. (1993, June). Statement of Financial Accounting Standards No. 117. Retrieved from Financial Accounting Standards Board : Joanne G. Carman, K. A. (2009, November 12). Evaluation Capacity and Nonprofit Organizations: Is the Glass Half-Empty or Half-Full? American Journal of Evaluation, 31(1), 84-104. doi: McCallick, M. (2013, February 25). Configuring QuickBooks for Use in a Nonprofit: Setting Up the Chart of Accounts. Retrieved from Techsoup: McLaughlin, T. A. (2016). Streetsmart Financial Basics for Nonprofit Managers (4th ed.). New York: John Wiley & Sons, Inc. Scarano, J. (2016, May 26). What Makes the Chart of Accounts for Nonprofits Unique. Retrieved from Araize:

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