Research Paper on:
Allocation of Expenses in Not For Profit Organizations (NPOs)

Unformatted Sample Text from the Research Paper:
organizations. However, there is also the need for non profit organizations to produce accounts as these organizations are also accountable to stakeholders. In this case, the stakeholders are not shareholders  but those who have given money or services to the organization as well as those who received the output of the organization. There are several areas of difference, for  example, the need for smaller non profit organizations to use cash accounting methods rather than the traditional accrual methods, and the capitalization and depreciation of assets also received special treatment  (Mosher, 2003). However, one area that may be seen as key in terms of accountability to the stakeholder is that of the functional expense allocation. Organizations that are set  up for purposes other than profit making, and are registered and non-profit making need to report the way the money is spent in terms of functional expense classifications. This helps  to show where the money is actually being used. The two primary functions are the supporting activities and the primary services of the organization (The Alliance, 2003). In the US  this is required under Statement of Financial Accounting Standards No. 117 and is reported under form 990 (The Alliance, 2003). Supporting activities are operations such as administration, fundraisings, the  development of memberships and operations that are not the delivery of the organizational primary goal (The Alliance, 2003). The reason that there is a separation of the functions into these  classifications is outlined in paragraph 26 of statement 117 which states that it is to "help donors, creditors, and others in assessing an organization s service efforts, including the costs  of its services and how it uses resources..." (quoted The Alliance, 2003). The definitions are further outlines in paragraphs 27 and 28 which summarizes any activities that is not the