This document provides an overview of Accounting 101 concepts including internal accounting controls, basic financial statements, and the statement of activities (SOA). It discusses the components of internal control and defines the SOA as a statement that describes an organization's revenues, expenses, and changes in net assets over a period of time. The document includes examples of SOA formats and step-by-step instructions for preparing an SOA, including identifying revenue and expense accounts and computing the change in net assets.

1. ACCT 101 Accounting and
Financial Management
Week #2
ACCT101-Week 2 1

2. WEEK 2 - TOPICS
• Internal Accounting Control
• Basic Financial Statements: Statement of
Activities (SOA)
• Practice preparing SOA with Examples
ACCT101-Week 2 2

3. Internal Accounting Control
Definition:
Internal control is the process designed to ensure:
• reliable financial reporting,
• effective and efficient operations,
• and compliance with applicable laws and regulations.
• Safeguarding assets against theft and unauthorized
use, acquisition, or disposal.
ACCT101-Week 2 3

4. Internal Accounting Control
The Components of the System of Internal Control:
Control environment. The management style and the
expectations of upper-level managers, particularly their
control policies. (eg. management's integrity, ethical values,
and philosophy)
Control activities. Control activities are the specific
policies and procedures management uses to achieve
its objectives. Control activities include the following:
- Segregation of duties
- Proper authorization
- Adequate documents and records
- Physical control
- Independent checks
ACCT101-Week 2 4

5. What Went Wrong
ACCT101-Week 2 5

6. What Went Wrong
ACCT101-Week 2 6

7. Statement of Activities
Definition
• Statement of Activity or Income Statement
describes how the organization has dealt with
its income and expenses in a given time period.
This is primarily established by understanding
how the organization’s net assets have been
utilized over time.
• This change in net assets is expressed through
the general equation:
• Revenues – Expenses = Change in Net Assets.
ACCT101-Week 2 7

8. Statement of Activities (SOA)
The Basic Equation
Revenues - Expenses = Change in Net Assets
Expenses =
• Salaries Expenses
• Rent Expenses
• Utilities Expenses
• Fundraising Expenses
• Interest Expenses
• Insurance Expenses
• Supplies Expenses
• Cleaning Expenses
• Maintenance Expenses
Revenue -
• General Contributions
• Donations
• Gifts and Collections
• Offerings and Tithes
• Grants
• Program Fees
• Membership dues
• Investment Income
• Net Asset released from
restriction
• Gain on sale of
investment
Change in Net Assets
• Unrestricted
• Temporarily Restricted
• Permanently Restricted
ACCT101-Week 2 8

9. Statement of Activities
Major Components of the SOA
• The Heading of the Statement
• Revenues, Gains and Other Support
• Expenses and Losses
• Change in Net Assets
• Net Assets at the Beginning or Beginning Net
Assets
• Net Assets at the End or Ending Net Assets.
ACCT101-Week 2 9

10. Statement of Activities
Example # 1
Operating Statement/Statement of Activities for
XYZ Nonprofit organization for Year Ending 20xx
Changes in Unrestricted Net Assets: Unrestricted
Temporarily
restricted
Permanently
restricted Total
Revenues and Gains:
Public Contributions
Program Service Revenue:
Investment Income:
Net Assets Released from Restrictions:
Total Revenues, Gains, Other Support: (A) XXXXX.XX
Expenses:
Program Services:
General Administration:
Fund raising:
Total Expenses and Losses: (B) YYYYY.YY
Increase in Net Assets: (C = A-B) ZZZZZ.ZZ
Net Assets as Beginning of Year: (D)
Net Assets as End of Year: (C+D)
ACCT101-Week 2 10

11. Statement of Activities (SOA)
Example # 2
Unrestricted
Temporarily
Restricted
Permanently
Restricted
Total
Revenues
Contributions
Net assets released
from restrictions
Total revenues
$10,000
8,000
18,000
$ 8,000
( 8,000)
–
$ –
–
–
$18,000
–
$18,000
Expenses
Program expenses
Gen & admin expenses
Fundraising expenses
Total expenses
–
2,650
–
2,650
–
–
–
–
–
–
–
–
–
2,650
–
2,650
Change in net assets 15,350 – – 15,350
+ Net assets-beginning – – – –
= Net assets-ending $15,350 $ – $ – $15,350
Your Church
Statement of Activities
For the Three Months Ended March 31, 2013
ACCT101-Week 2 11

12. Statement of Activities
Steps in Preparing the SOA
1. From the list of a trial balance items, identify
the revenues, expenses and net assets
related accounts and their amounts
2. Prepare the Heading of the statement
3. Work on the revenues and support section
4. Work on the expenses and losses section
5. Compute the Change in Net Assets
6. Compute the Ending Net Assets
ACCT101-Week 2 12

13. Statement of Activities
Practice SOA_1
Please place the following in a statement of activities format for the period ending July
31, 2013:
Contributions $50
Tape sales $65
Rental income $50
Fees received $5
Interest income $20
Insurance expense $10
Payroll expense $50
Utilities $75
Net Assets, beg. of year $250
ACCT101-Week 2 13

14. Statement of Activities
Practice SOA_1 - Solution
My Not-For-Profit Organization
Statement of Activities
Year Ending July 31, 2013
Revenue, gains and other support:
Contributions $50
Tape sales 65
Interest Income 20
Rental income 50
Fees received 15
Total revenue, gains and other Support 200
Expenses and losses:
Insurance 10
Utilities 75
Payroll 50
Total expenses 135
Change in net assets 65
Net assets, beg 250
Net assets, end $315
Challenge: Needed to know which accounts are reflected on the Statement of Activities
ACCT101-Week 2 14