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I also like the comparison tables and thought they added value to the text. Consider using your company’s financial statements as tools to motivate and engage your team. The income statement can show how your employees’ projects positively impacted the company’s revenue, which could boost their performance The Basic Financial Statements Financial Strategy for Public Managers and drive. The income statement, also known as the profit and loss statement, or P&L, gives an overview of the income and expenses during a set period. Typically presented annually or quarterly, the income statement allows businesses to compare trends in income and expenses over time.
- They do not control those plans, but they are obligated to pay into them and to record their employees’ portion of those plans’ assets on their own financial statements.
- Some require cost measurement that might be expensive or infeasible.
- All applicants must be at least 18 years of age, proficient in English, and committed to learning and engaging with fellow participants throughout the program.
- All employees were paid on the first Monday of each month for earnings from the previous month.
- Virtually all non-profits have some sort of restrictions on when and how their organization can spend money.
- First, special districts allow for more direct taxpayer control.
Contract services and overheads were paid for in the month of service. Miscellaneous expenses were paid out of petty cash, with petty cash being drawn out of the YVMDC bank account on a monthly basis. In April, she contacted the districts she had been working with and told each that she would have to begin charging $75 per student per month. Each student would receive tutoring services in September through May. This was still well below what it would cost the districts to provide the services themselves, so two districts agreed to continue the program.
How & Why Managers Use Financial Statements
The textbook seems most appropriate for graduate students but Chapter 1 and Chapter 6 could definitely be incorporate into an undergraduate public financial administration course. One of the key questions when computing indirect cost rates is which indirect costs are allowable or reasonable? Certain types of training might be helpful, but not essential for staff to understand their jobs and deliver the service. And of course, there’s always reason to define indirect costs as broadly as possible, especially if you can recover those costs through some external funding source. Tribes across the US argued that by re-classifying many of BIA’s costs, the federal government gave itself permission to slash BIA’s budget without Congressional approval.
Sanchez thought it would be appropriate to recognize depreciation for the vehicle upon delivery. Depreciation for existing fixed assets was estimated to be $33,000. Chang spent the summer preparing to expand the program in the fall. She hired five part-time tutors at $15 per hour, for 80 hours each per month, from September 1 to May 31.
Recognition and the Fundamental Equation
Note also the staggering variety of services provided and populations served. Non-profits conserve land for future generations, manage affordable housing programs, and provide pro bono legal services for the poor. Like governments, most of their money is spent on employee wages and benefits. And like governments, the non-profit sector is comprised of thousands of small organizations but dominated by a handful of larger organizations.
In concept, business-type activities should cover their expenses with the revenue they generate through fees and charges for their services. In fact, many governments operate business-type activities because those activities are profitable and can subsidize other services that cannot pay for themselves. Since business-type activities are expected to pay for themselves, we account for them on the accrual basis and prepare a separate set of proprietary fund financial statements. Accrual basis accounting, assumes an organization records a transaction when that transaction has an economic impact, regardless of whether it spends or receives cash.
Transactions that Affect the Income Statement
Note payable consists of a note from Puget Sound Development Commission, payable in monthly installments of $1,328, including interest at 3%, through April 2016; secured by land and building. The Organization has a $50,000 line of credit with Puget Sound Community Bank with interest payable monthly at an adjustable rate corresponding to the Prime Rate, but not less than 6% (6% at June 30, 2016). The line is secured by real property and matures June 30, 2016. There were no outstanding advances on the line at June 30, 2016. Government grants and contracts are recognized as revenue when the services are performed. The Center maintains a qualified contributory retirement plan under Section 403(b) of the Internal Revenue Code for all employees meeting certain age and service requirements.
If they spend more than their budget allows or spend money in ways not specified in their budget ordinance, they are breaking the law. Since the late 1970s MHCC had offered patient rights advocacy, life skills coaching, anger management classes and several other mental health-related services to some of the poorest residents of the Bay Area. Much of its work was funded by and delivered through contracts with local governments. Finally, the cash flow statement details the inflows and outflows of cash for a specific period.
Technique Supports Strategy
Given those assumptions about cost centers, we can assume the cost object for the copier service center is the cost per copy. At the outset it’s important to draw a https://quickbooks-payroll.org/ distinction between full cost accounting and differential cost accounting. Full cost accounting is the process of identifying the full cost of a good or service.
- It has virtually no current liabilities in its governmental funds, and virtually no long-term debt in its proprietary funds.
- It purchased and renovated a small building in downtown Yakima in 2014.
- More complex activities, like the information-gathering about Duncombe County residents, would incur costs at a different rate than simpler activities.
- A review of the trends should inform your interpretation of the ratios.
- This deficit tells us that, not surprisingly, OP’s public safety services do not pay for themselves.
If a business-type activity like a golf course is not profitable, does it offer enough indirect benefits in areas like economic development and tourism to justify that lack of profitability? With a careful look at the Statement of Activities, you can begin to put numbers to these and other questions. Total expenses grew by 14.5% from FY2014 to FY2015, a growth rate that is lower than the rate of revenue growth. Say, for example, that most of OP’s employees belong to the Kansas Public Employees’ Retirement System. That System sends OP a bill for $14.86 million to cover pensions and other costs related to the OP employees now in the System. Those resources are effectively unavailable for the coming year.
