Spark received $302,000 in revenue during the fiscal year ended December 31, 2015 out of this, $208,600 was restricted, while $93,400 was temporarily restricted. Sparks expenses for the fiscal year 2015 were as follows: public health education - $65261, community services - $46615, management and general expenses - $37292, and fundraising - $37792. In total, the organization spent $186,460 during fiscal year 2015. The total increase in the organizations net assets during the 2015 fiscal year was $115,540 restricted assets comprised $93,400 of this amount. The statement of financial position shows that Sparks assets at the end of the fiscal year 2015 comprised cash ($33,100), contributions receivable ($93,400) and net equipment and furniture ($10,840); in total, the assets stood at $137,340. The only liabilities the organization had at the end of the fiscal year 2015 were accounts payable ($3,800) and salaries payable ($18,000). Sparks liabilities bring down the net assets to $115,540.
The statement of cash flows shows that Sparks operating activities provided $38,100 in the fiscal year 2015; receipts from contributions were $170,000, and payments to employees and suppliers stood at $118,000 and $13,900 respectively. Spark purchased equipment for $5,000 during the financial year. Overall, the net increase in the organizations cash was $33,100. Adjusting the change in net assets for the fiscal year 2015 shows the following non-cash items that influenced the balance of net assets at the fiscal year end depreciation ($1,760), increase in net contributions receivable (- $93,400), increase in accounts payable ($3,800), increase in salaries and wages payable ($18,000) and the gift of furniture (-$7,600).
The statement of functional expenses shows that, at $151,000, salaries and wages comprised the largest proportion (80.98%) of the organizations expenses in the fiscal year 2015. The distribution of salaries and wages across the program services and the support services was as follows: program services; public health education - $52,850, community service - $37,750, support services; management and general expenses - $30,200, fundraising - $30,200. The total rent expense for fiscal year 2015 was $16,000 and this is how Spark distributed it across program services and support services: program services; public health education - $5,600, community service - $4,000; support services the two items took $3,200 each. Other expenses were the telephone expense - $5,600, printing and postage expense - $10,000, supplies expense - $2,100 and depreciation - $1,760. Public health education consumed more expenses than any other service did in the fiscal year 2015: public health education - $65,261, community service - $46,615, management and general services - $37,292, and fundraising services - $37,292.
The financial statements suggest that the organization is strong in keeping the costs of operation within budget because its expenses for the fiscal year 2015 were about 60% of the revenue. In addition, the organizations financial management strategies are prudent considering that more of its funds ($111,876) went to its core activities in comparison to the funds ($74,584) it spent on administrative and support activities. However, Spark has a weak cash position, which might undermine its capacity to conduct core programs. The total net assets increased by $115,540 in the fiscal year 2015, but the cash flow stood at just $33,100. Looking at the cash flow from operations, if it were not for the salaries in arrears, the organization would have ended with cash reserves too thin to meet emergencies. If the organizations programs grow at a faster rate than the cash flow does, it will find it difficult to implement all programs.
If Spark were a for-profit organization, the owners equity section of the statement of financial position would have stood in place of the net assets section because for for-profits, owners contribute capital, which entitles them to a claim on the organizations assets and earnings (Weil, Schipper & Francis, 2013). In addition, instead of preparing a statement of activities, Sparks would have prepared an income statement that shows revenue earned from the sale of goods and services, and the expenses incurred in earning the revenue. Spark would have categorized the surplus or deficit of revenue over the operating expenses as profit or loss, respectively. The statement of changes in equity, too, would have replaced the statement of change in net assets. However, the statement of cash flow would not have been different if Spark were a for-profit entity; the organization would still have used the changes in current assets and non-cash items used to reconcile the cash flow from operations to the net income.
In place of the statement of financial position, government-operated entities prepare the statement of net assets (Fischer, Taylor, & Cheng, 2015). Thus, if Sparks were government-operated, it would not have prepared a statement of financial position, but a statement of net assets. In addition, government-operated entities have to prepare a comprehensive annual financial report that contains detailed analyzes about their financial status. Therefore, in addition to the four main financial statements, Sparks would have prepared a comprehensive annual report if it were a government entity.
Fischer, P. M., Tayler, W. J., & Cheng, R. H. (2015). Advanced accounting (12th edition). Boston, M.A: Cengage Learning.
Weil, R. L., Schipper, K., & Francis, J. (2013). Financial accounting: an introduction to concepts, methods and uses (14th edition). Mason, OH: South-Western, Cengage Learning.
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